While mobile costs have fallen over the past 20 years, current U.S. tax codes have not changed. Considering that U.S. businesses will spend an estimated $59 billion on cellular voice service for employees, under the current formula, it could cost U.S. enterprises over $4 billion per year.

 

Under the current requirements, employees have to keep a record of each call, including the time it is incurred, and its business purpose. In addition, personal use of employer-paid devices is still considered a taxable fringe benefit and classified as a luxury item, according to a white paper commissioned by the Telecom Expense Management Industry Association.

 

According to Joe Basili, managing director of the Telecom Expense Management Industry Association, as rising mobility costs drive the need for TEM plans, most organizations have a decentralized environment in terms of enterprise mobility, TMCnet reported.

 

“There are opportunities to gain more control over how services and devices are procured, optimization of charges, expense validation, usage accountability, business intelligence and reporting. It can also help with better security of mobile data and compliance to IRS tax rules.

 

Many enterprises report that they expect to see spending for mobile services to rise, Basili said.

 

“This is likely as they start to rehire workers or extend mobile services to more employees. The key is that the average expense per user for mobile services with companies that have a TEM program is consistently lower compared to organizations that have no TEM program.”     

The IRS and Treasury Department have proposed three methods to simplify enforcement of the tax. The first is “minimal personal use,” which is a method in which employees can avoid tax liability if they can show proof they use personal cell phones for non-business calls during work hours or a second approach that would establish a “minimal personal use allowance of phone minutes” that would not be taxed.  A second pitch, deemed the “safe harbor substantiation” method, calls for 25 percent of employer-paid cell phone use to be allocated to personal calls. The third is the “statistical sampling method,” where employers could use statistical sampling to establish the portion of personal use versus business use.

 

TEMIA’s (News - Alert) position is that tax on employee use of employer-paid mobile devices “is outdated and it should be abolished.” The paper also includes strategies on why establishment of a corporate liable plan will help to control expenses and manage security.

 

A number of TEM suppliers provide services and applications to track personal use and of manage the taxes as it currently is written. In addition to cost-savings and tax assistance, customers can gain other significant benefits from Tellennium’s telecom cost management solutions.