Most of us are now joined at the wrist to our iPhones and Androids, which is quite a phenomenon considering that the iPhone was only introduced in 2007.
We also tote tablets and can process payments for transactions on the fly with Square or other devices or apps on our electronic devices.
However, using smartphones and other devices in business raises a number of issues.
Here’s what business owners need to know and what regulations could be forthcoming.
The Small Business Jobs Act of 2010 removed cell phones from the definition of listed property, a move that opened the way for making write-offs for the cost of the phones easier to obtain. However, the law did not change the treatment of cell phones as a taxable fringe benefit unless an exclusion applies. What does this mean now?
- Deductions for devices. If you provide smartphones for your staff, the company can deduct the associated costs (first-year expensing or regular depreciation for the cost of the phones; deductions for monthly charges).
- Fringe benefit. Under IRS guidance, if the devices are provided for work-related purposes and not primarily as compensation, then there is no taxable fringe benefit (this is treated as a nontaxable working condition fringe benefit). Noncompensatory reasons for giving devices to employees include a company requirement that they speak with clients and customers when away from the office or to speak with clients and customers in other time zones outside of the employees’ normal work day. Personal use in this case is not taxed; it’s viewed as a nontaxable de minimis fringe benefit. However, providing a device to promote morale or good will of employees, to attract prospective employees, or as a means of additional compensation triggers taxation (i.e., taxable compensation to employees and employment tax obligations of the company).
When employees use their company-provided smartphones or other devices after business hours for a business activity, are they “on the clock?” That’s what the Department of Labor (DOL) is looking into now as part of their Semiannual Regulatory Agenda. We don’t have an answer yet, but can anticipate rules from DOL in the near future.
Nonetheless, company policy implemented now can help to prevent a requirement of overtime pay for using company-furnished devices after normal business hours:
- Prohibit employees from using company-provided smartphones after the business workday.
- Require employees to keep logs of after-hour business calls.
Technology is proceeding faster than government rules can address the onslaught of developments. Watch for new rules and regulations to be promulgated as technology evolves.