Proposed Tax Law Change Would Simplify Business Cell Phone Reporting

A proposed change to the tax laws would help small business owners in several ways. I'll talk about these over the next couple of blogs. The proposed law is H.R. 5719, the "Taxpayer Assistance and Simplification Act of 2008," passed by the House on April 15. (Congress definitely has a sense of humor). The law contains a provision that would remove cell phones and other similar telecommunications equipment from being classified as "listed property." What does this mean? Listed property is property used in businesses which could also be used for personal business. In order to depreciate listed property like cell phones, business owners must substantiate their use of this property for business purposes. This has meant that every single phone call on a business cell phone has to be documented, showing:

• the amount/cost for the call
  
• the time and place of the call
  
• the business purpose for the call
  
• the number dialed.

In addition, the bill may also change the requirement that employers who give cell phones to employees for business use must treat them as income to the employees.

In other words, if you claim your business cell phone as business property, currently you must save all your monthly cell phone bills and be prepared to document every single call. The words "onerous" and "burdensome" have been used a lot by business advocates, and I agree. In addition, currently if you give a cell phone to an employee for work purposes, the monthly cost of the cell phone must be withheld from your employee as income. Again, pretty ridiculous, considering most small businesses have at least a couple of employees who have been given cell phones for essential work purposes.

The proposal to remove cell phones from the "listed property" classification will remove these documentation requirements. President Bush has threatened to veto the bill (because of provisions to change Health Savings Account accounting and reporting requirements, which I will discuss in the next post). I'll keep you informed on the progress of this bill.