Geithner Lobbies, IRS Dumps Cell Phone Tax

By Major Garrett

WASHINGTON - The Internal Revenue Service has dropped the idea of taxing employer-provided cell phones or personal digital assistants (PDAs).

Treasury Secretary Tim Geithner, fearing an uprising from millions of workers infuriated that devices that keep them tethered to work at all hours would now be taxed, lobbied the Internal Revenue Service to kill the tax. Tuesday it did.

In statement posted on the IRS website, IRS Commissioner Doug Shulman said the agency was at first seeking "ways to simplify compliance with rules related to employe-provided cellular telephones," but decided existing rules are too cumbersome to enforce.

The IRS toyed with ways to toughen compliance with a 20-year old law almost universally ignored by employers and employees. One approach the agency considered was to count as personal one-quarter of all employee cell phone use. That estimated amount would then have been taxed as employee income. But this and all other options to tax personal cell phone use are now dead and the IRS wants Congress to complete the burial.

"Secretary Geithner and I ask that Congress act to make clear that there will be no tax consequence to employers or employees for personal use of work-related devices such as cell phones provided by employers," Shulman's statement said. "The passage of time, advances in technology and the nature of communication in the modern workplace have rendered this obsolete."

Somewhat defensively, Shulman said the IRS was not looking, necessarily, for new revenue but improved tax compliance.

"The current law, which has been on the books for many years, is burdensome, poorly understood by taxpayers, and difficult for the IRS to administer consistently," Shulman's statement said. "Some have incorrectly implied that the IRS is 'cracking down' on employee use of employer-provided cell phones. To the contrary, the IRS is attempting to simplify the rules and eliminate uncertainty for businesses and individuals."

Those attempts to "simplify the rules" are now scrapped, thereby leaving cell phones and PDAs, for now, clear of IRS jurisdiction.