An effort by the U.S. Internal Revenue Service to revamp the way employers and workers account for personal cell phone use is intended to save companies money, an IRS official said on Friday.

A law dating to 1989 requires companies seeking to deduct worker cell phones as an expense to track personal use with painstaking documentation of minutes. The IRS says a notice issued this week is intended to make it easier for employers and workers to comply with the law.

Minute by minute documentation really doesn't make any sense -- we've been hearing all about it, and we said yes it makes no sense, said a senior IRS official, who was not authorized to speak for attribution.

Proposed changes issued by the IRS are intended to reduce how much employers have to spend trying to comply with the tax law, the official added.

Under current law, workers are required to pay tax on personal cell phone use on a work phone as a fringe benefit.

The IRS this week issued a notice seeking public comment on ways to revise the current system. Options include letting employers deduct the entire sum of a worker's cell phone use if a worker can establish she uses a personal phone for some period, and letting employers use statistical sampling to generalize about usage.

Another idea is for employers to assign a set rate for business use, 75 percent proposed by the IRS, with the remaining treated as personal use.

For employers we thought we should give them alternative ways to take these deductions, the IRS official said.

The agency will take public comment on the proposals until September 2, 2009.


The IRS effort could add impetus to an effort by the cell phone industry and business community to scrap the law entirely.

The policy rationale of the late 1980s when this law was passed was a time when cell phones were a luxury, said John Taylor, a spokesman for Sprint Nextel Corp . Think about the all you can eat rate plans we offer. For an employer that is a burdensome record-keeping requirement.

Lawmakers last year came close. The U.S. House of Representatives passed a repeal and the Senate got 60 sponsors for its bid.

The measures, which have bipartisan backing, have been reintroduced again this year.

The cell phone industry, the Chamber of Commerce and others last week wrote leaders of the House and Senate committees that would take up the bills to lobby for its passage.

Meeting these strict substantiation requirements burdens the business use of cell phones, dampens the use of advanced technology and is impractical given their frequent use in a fast-paced global work environment, the coalition wrote in their letter, dated May 5.

(Editing by Steve Orlofsky)