- Sales Tax
- Charitable Contributions
- Unrelated Business Income
- Form W-9
- Foreign Vendors
- Employment Issues
- Fringe Benefits
- Independent Contractor versus Employee Status
- Intermediate Sanctions (Private Benefit/Private Inurement)
- Cellular Phone Policy & Procedures
Cellular Phone Policy & Procedures
Cellular telephones (cell phones) may be issued to University employees who have a frequent need for remote phone access. University employees shall use their cell phones for necessary University business related to employment and educational purposes. Each employee shall be responsible for the safekeeping, care, and custody of the assigned cell phone. All cell phones must be registered with Telephone Services.
The University reserves the right to monitor the use of all University owned cell phones. Employees should avoid talking on a cell phone and driving a motor vehicle at the same time due to safety concerns. Employees should be aware that cell phone conversations are not secure and should use discretion in relaying confidential information.
University personnel wishing to acquire the use of cell phones and services are to submit a written request to their supervisor describing their needs for such phones or services. The following factors are to be considered when the request is submitted:
- The amount of time and frequency that the employee is away from access to land-based phone services.
- The level of expected business usage.
- The availability of department funds to cover the added costs of equipment and service.
- The availability of loaner phones from Telephone Services. An Employee Cell Phone Agreement must be signed when equipment is issued to user.
Upon approval of the request, a "Cellular Phone Request Form" must be completed and forwarded to Telephone Services. The "Cellular Phone Request Form" must be approved by the department head or dean, or by the requestor's supervisor if requestor is a department head, dean or higher level. An employee cell phone agreement must be signed when the equipment is issued to the user. (Top)
The IRS has recently become very interested in employee benefits provided by employers, and IRS representatives and institutional tax professionals have strongly emphasized this area of review.
IRS Code section 274(d) provides that no deduction shall be allowed with respect to "listed property", unless a taxpayer substantiates such deduction by adequate records regarding the amount, time, and business purpose. Listed property is defined in Code section 280F(d)(4) and specifically includes "any cell phone (or other similar telecommunications equipment)."Listed property, by IRS definition, means that the very nature of the property subjects itself to personal use and thus is subject to strict substantiation requirements in order to be excluded as a taxable benefit.
For the use of a University-provided cell phone to be excludible from taxable income, there must be a business connection for the use of the phone and such use must satisfy the substantiation rules of section 1.274-5T of the tax regulations. Per section 1.274-5T(c)(2)(ii)(C), to constitute an adequate record which substantiates the business use of listed property, the record must contain sufficient information as to each element – amount, time, and business purpose – for the business use. In addition, each separate use by the taxpayer constitutes a separate expenditure for purpose of substantiation. (Top)
Effective February 2006, with the January/February cell phone statement, the monthly service plan amount paid for an employer-provided cell phone will be treated as taxable income to the employee. The University will continue to pay the cost of the monthly service, and the employee will pay the resulting tax from the inclusion in the employee's taxable income.
An exception will be allowed if the employee signs a written statement that the usage of the University-provided cell phone is solely for business purposes (Exhibit 1, attached), and the employee maintains auditable records showing all calls made or received on the University-provided cell phone have a Baylor business purpose. If this election is made, the cell phone number should only be provided to others that need to contact the employee for a legitimate business purpose. However, a few inadvertent or randomly made or received phone calls will not likely subject usage to taxable income based on the IRS "de minimis" fringe benefit rule. The University will consider 10 minutes per month on personal calls as "de minimis" and therefore not includable in taxable income.
Employees that claim this exception will be subject to periodic audits by the University and must provide adequate documentation when a request for such is made. If the proper substantiation is not provided, the entire cost of the monthly service will be included as taxable income. A list of phone numbers contained on a bill is not sufficient to satisfy the business purpose reporting obligation. The following are some suggested methods for documentation that the University will view as acceptable:
- If all numbers called or received have a "710" prefix, then a single statement can be documented on the phone bill that all numbers beginning with 710 were Baylor numbers and were business related calls.
- If a phone number is called for a business purpose on more than one occasion in a particular month, the same number does not need to be documented every time a call is placed to that particular number.
- A single phone log of commonly called business numbers, including documentation of the business purpose for each number, can be maintained. This log can be copied and attached to the monthly phone bill.
It is a departmental budget decision as to whether the University will reimburse business calls made on an employee's personal cell phone. It will be dependent on the availability of budget funds and the department's willingness to monitor the substantiation and documentation requirements to assure that only the cost of business calls is being reimbursed. The substantiation requirements are the same as those given above. The reimbursement would have to be calculated on a pro rata cost of the bill. The monthly bill should be checked by the department to check for any abuses. (Top)