New IRS Guidance for Nonprofits About Tax Treatment of Cell Phones Available

New Internal Revenue Service (IRS) guidance describes how employers can handle the cost of cell phones they provide to employees. The guidance, found in IRS Notice 2011-72 and the Sept. 14 memorandum to field examiners, “Interim Guidance on Reimbursement of Employee Personal Cell Phone Usage in light of Notice 2011-72,” also describes how to handle reimbursement of cell phone costs if the employee provides the cell phone.

Providing a cell phone — or a cell phone allowance — to employees can be tax-free in many situations, including if your organization needs to be able to contact an employee at all times for work-related emergencies or if you require that an employee away from the office be available to speak with clients or constituents.

In other words, the cell phone must be needed for the nonprofit’s benefit and cannot be provided simply as a form of compensation. For more details, contact your tax advisor.