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Computers/Office Equipment/Cellular Telephones

by Cochran,Robert Lee last modified Oct 18, 2009 08:51 PM

Wireless Communication Devices/Laptop Computers/Office Equipment/Cellular Telephones

 

As of July 1, 2009, the Internal Revenue Service tax laws to determine the taxable value for the personal use of this property have not changed.  Legislation (H.R. 690 and S. 144) introduced this year in the House and Senate seeks to remove cell phones and similar devices as listed property; however, this legislation has not become law.

 

BACKGROUND

 

By choice or necessity, employees work at home or otherwise away from the office.  Employers provide employees with desktop computers they can use at home or laptop computers, cellular telephones, etc., for use during travel.  Although employers usually intend employees to use the computers predominantly for business-related activities, the equipment may be available for the personal use of the employees and and their families.

 

Employer-provided equipment is nontaxable to the employee if it qualifies as a working-condition fringe benefit (through substantiation of businesss use); however, if the employee or his or her family also uses the computer for personal purposes, an allocation must be made between business and personal use based on hours of use, and the value of the personal use must be included in the employee's income, unless it is excluded as a de minimis fringe benefit.  Strict subtantiation rules apply to the business use of a computer, which may not be excluded as a working condition fringe benefit unless the employee maintains adequate records as required under Section 274 of the Internal Revenue Code.  The same strict substantiation rules apply to employer-provided cellular telephones and personal digital assistants (PDAs).  Employees are required to maintain sufficient records, such as a log book, to substantiate business use of employer-provided equipment.

 

CELL PHONES AND OTHER WIRELESS COMMUNICATION DEVICES

 

Federal tax law dictates that the personal use of university-provided wireless devices is a taxable fringe benefit.  Internal Revenue Service rules mandate that the employee keep a log documenting each incoming and outgoing business call, including the business purpose of the call, and that the university include the value of personal calls in the employee’s taxable income.  If the log is not kept, the IRS requires that the entire cost of the wireless device plan is taxable income to the employee, even if most of the calls were business-related.

 

Units are expected to manage their business needs for wireless communication devices (cell phones and personal digital assistants (PDAs) with cellular capability) in a fiscally responsible manner while complying with federal regulations.

 

POLICY

 

Units may provide either a wireless communication stipend or a university-owned wireless communication device to an employee who has a documented official university business need for a communication device and continues to meet eligibility requirements as indicated below.

 

The wireless communication stipend is intended to reimburse the employee for the business use of the device.  The stipend is not intended to fund the cost of the device nor pay for the entire monthly bill.  The assumption is that most employees also use their wireless communication devices for personal calls.

 

Cell phones and other wireless devices should not be selected as an alternative to other means of communication, such as land lines, pagers, and radio phones, when such alternatives would provide adequate but less costly service to the university.

 

SECURITY

 

The university reserves the right to require any mobile device accessing the university’s infrastructure to be subject to future mobile device security policies and guidelines as established by the university’s information security office and Information Technology governance structure.  This applies to both university and personally-owned devices.

 

Security policies may include device requirements for mobile anti-virus/spyware, mobile firewall, secure communications, encrypted file folders including storage cards, strong passwords, two-factor authentication, and/or destruction and disabling in the event of a lost or stolen device.  Costs for any mobile security measures will become the financial responsibility of the organizational unit and/or the individual owner of the device at the time such requirements become university policy.

 

WIRELESS STIPEND ELIGIBILITY REQUIREMENTS 

 

To qualify for the wireless communication stipend, the employee must have a business need, defined and approved by the supervisor, which includes one or more of the following:

 

  • The employee’s job requires that they work regularly in the field and need to be immediately accessible.

 

  • The employee’s job requires that they need to be immediately accessible outside of normal business hours.

 

  • The employee is responsible for critical infrastructure and needs to be immediately accessible at all times.

 

  • The employee travels and needs to be accessible or have access to information technology systems while traveling.

 

  • Access via voice and/or access to information technology systems via a mobile communications device would, in the judgment of the supervisor, render the employee more productive and/or the service the employee provides more effective, and the cost of mobile communications service is therefore warranted.

 

This access may be limited to voice communications or also require access to information technology systems—e.g., e-mail, calendar, Web, UL portal, etc.

 

WIRELESS COMMUNICATION STIPENDS

 

The wireless communication stipend does not constitute an increase to base pay, nor will it be included in the calculation of percentage increases to base pay due to raises, job upgrades, retirement or other compensation increases.  The stipend will be itemized on pay stubs, reported on employee’s W-2s and subject to withholding taxes.

 

The monthly stipend amount will be established by the respective Vice President.

 

The determination of the stipend amount covers the employee’s projected business-related expenses only.

 

RESPONSIBILITIES OF EMPLOYEES RECEIVING STIPEND

 

When a wireless communication stipend has been approved and provided to an employee for the conduct of official business, the employee must comply with the following:

 

  • The employee will provide the phone number within five days of activation and will be available for calls (in possession of the wireless communication device and have it turned on) during those times specified by management.

 

  • The employee may select any wireless carrier whose service meets the requirements of the job responsibilities as determined by the supervisor or organizational unit head.

 

  • The employee must inform the university when the eligibility criteria are no longer met or when the wireless service has been cancelled.

 

  • Management may periodically request that the employee provide a copy of the first page of the phone bill in order to verify that he/she has an active wireless phone plan.  Management may also periodically request documentation of substantial business use.  At minimum, documentation is required when initially applying for the stipend and each time the stipend is renewed.

 

  • The employee is responsible for all charges on his/her personal wireless plan, including early termination fees.  If the employee leaves the position, he/she continues to be responsible for the contractual obligations of his/her wireless plan.

 

  • The employee is personally responsible for complying with international, federal, state, and municipal laws regarding the use of wireless phones and other communication devices while driving.  Under no circumstances will the university be liable for non-compliance.

 

  • The employee should use discretion in relaying confidential information over wireless devices since wireless transmissions are not secure.

 

The employee does not need to maintain a log for business and personal phone calls if receiving a wireless stipend.

  

WIRELESS COMMUNICATION STIPENDS ON SPONSORED PROJECTS

 

Contact your project investigation/grants administrator for guidelines and restrictions for charging wireless communication stipends on sponsored projects.

  

MISCELLANEOUS WIRELESS COMMUNICATION ISSUES

 

Extraordinary business use of any employee’s personal wireless device in excess of the monthly stipend can be reimbursed with appropriate documentation and approval.

 

Misuse or fraudulent receipt of a wireless communication stipend may result in progressive administrative and/or disciplinary action up to and including termination of employment and criminal prosecution.

 

All wireless communication stipends are to be deactivated at the end of the fiscal year.  A wireless communication stipend must be renewed annually.  This renewal process allows the employee and the department the opportunity to review the continued business need for the stipend and update any stipend amounts.  The employee must provide documentation of plan coverage and business use at annual renewal time.

 

 

UNIVERSITY-OWNED WIRELESS COMMUNICATION DEVICES

 

With the approval of the president, provost, a senior vice president, vice president, or a dean, the university may purchase a wireless communication device with its associated plan in certain limited circumstances.

 

The most appropriate business purchase would be for phones or devices that rotate among staff, facilities, or maintenance personnel.  This equipment would generally not be assigned to a specific individual nor taken home on a regular basis.

 

Business officers in the organizational unit must review the monthly bills of university-owned wireless communication devices to ensure that no personal calls were made.  Inadvertent or emergency personal calls must be reimbursed to the university.

 

Wireless communication devices may be assigned to specific individuals; however, to comply with current Internal Revenue Service regulations, all monthly bills must be periodically reconciled.  Reconciliation includes declaration of the specific purpose of each business-related call.

 

If a regular reconciliation is not conducted, 100% of the cost of the wireless device is reportable as taxable income to the assigned employee.  Furthermore, single (communal) bills involving multiple communication devices and users must be reconciled in entirety.  100% of the charges for unreconciled billings must be declared as taxable income to the respective device users, even if most of the calls were business-related.

 

The Noncash Compensation Form will be used to report taxable income to the payroll office.  The earnings code of CEL will be used to indentify the taxable value of cell phones, personal data assistants, and other handheld equipment.

 

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