Discussion:Before you deduct that cellphone
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Death&Taxes (talk|edits) said: | 30 April 2008 |
| take a look at Tash v. Commissioner, T.C. Memo. 2008-120 (4/29/08) where Sec. 274(d) requirements come into play. http://taxprof.typepad.com/ | |
| 30 April 2008 | |
| D&T, as much as I detest reading TC Memos and the like, I did read/scan this one because the issue of cell phone expenses is so common and I try my best to be as conservative as possible even when I get the typical, "it's all for business", right! Anyway, there appeared to be many, many other issues that were much more in question and I think I only saw one short sentence regarding cell phone expense and that did not include any amounts deducted (am I correct in this?). I think there needs to be further direction/clarification of deductibility instead of us having to once again "use our professional judgment". Did I miss something in this? | |
Death&Taxes (talk|edits) said: | 30 April 2008 |
| No, I don't think you missed anything but you can see that when the balance of proofs is in doubt, the Court will give nothing. | |
| 30 April 2008 | |
| In other words, make sure everything is as clean as possible and 'conservative', allocated cell phone expense might be 'overlooked'? | |
| 30 April 2008 | |
| I am still really struggling with differentiating a cell phone from a land line for deductibility. Business land lines are used all the time for personal calls (eg School nurse calls to say child is ill). I can't believe that companies like IBM, HP, etc look at the percentage of use when deducting the costs of these lines. So when a business chooses to use cell phones instead of land lines, why is it different? I can see if the charges are per minute or per call, but they are usually flat fees just like a land line. Am I missing something, or is this just an area where the IRS feels there is a lot of abuse going on?
I have a lot of small businesses that have foregone a land line and gotten a cell instead. They use the cell # on their business cards, and it is typically the only feasible way of contacting these people, since they are seldom in an 'office'. They all have fixed fee plans (not charged by the minute). Are others in this situation still recommending a % of costs for deductions? | |
| April 30, 2008 | |
| WW, I think there is a difference between IBM providing land lines for business and allowing (or accepting, or tolerating) their employees' use of these lines for personal purposes, and a sole prop using his/her own cell phone, which is being claimed as a business expense, for personal purposes.
That is, for companies like IBM, having employees use business phones for personal purposes is an acknowledged "cost of doing business". The IBM's and HP's of the world may choose to be more less "accepting" of the practice, but personal use of corporate phones is a fact of business life. The phone is still a justifiable, business expense. I don't believe the holds true for the sole prop. The New Tax Guy | |
| 30 April 2008 | |
| So small businesses should have to have 2 cell phones - one for personal calls and one for business, as a call from the school nurse is not a "cost of doing business" for them? The distinction still seems to be that it is a cell phone, bc if the sole prop had a land line in his office, I highly doubt they would ever question how many personal calls were made on it. | |
Death&Taxes (talk|edits) said: | 30 April 2008 |
| Cellphones are listed property and that is why they fall into Sec. 274 record keeping requirements. This goes back to the mid-80s when listed property was put into the law. At that time, no one could anticipate there would come a day when many people do not use a land line. It was about that same time that Congress passed Sec. 262(b) concerning the deduction of the home telephone line. | |
| 30 April 2008 | |
| And even that is getting to be outdated, as more and more people are opting out of land lines and just going with cell phones, even in their homes. I understand the rules are against it, but they no longer reflect the current means of conducting business. But at least I know have IRC jargon to throw at the client when they ask why they can't deduct the entire business phone just because it is a cell. | |
| 30 April 2008 | |
| There is HR 5791 which is in the Senate now that would remove cell phones from being listed property. | |
| 30 April 2008 | |
| Of course, since everyone must be keeping usage records for their various business computers, doing so for their cell phones won't be any problem... | |
| 30 April 2008 | |
| Gee I miss the 70's when you could slap a sign on the side of your truck and deduct the thing (ok, I say that somewhat toungue and cheek but not totally!). When you could deduct all of the depreciation on your mercedes and even get investment credit (I'm a little fuzzy on that one, maybe I didn't take IC on autos??). When listed property was the stuff you put on the depreciation schedule. When tax rates were...ok, maybe I don't miss the 70's as much but the 80's were sure fun up until about 86 when congress broke up the party. All those manually prepared 1120's and 1065's...Ok, maybe I'm not as nastalgic as I thought. | |
Death&Taxes (talk|edits) said: | 30 April 2008 |
| But they were fun times: come December clients would call to gain approval to buy a new business car and get the amazing 5K 179 deduction. Then calls would come in from promoters seeing if you had clients needing Historic Credits for facades, or did any want to buy into a leasing shelter, or worse, the coal shelters with guaranteed 8-1 write off ratio.
The 2106 was on the front of the return, like a Schedule C without at risk rules, and employers loved to move employees around, so that you had 3903, 2106 and the 4K IRA for the married couple, plus the Sch W for that same couple and if they made too much money, there was always Sch G! With a 15 year life for a rental property, the biggest danger you had in tax planning was your client wasting deductions at low brackets. Back then the bad preparers would insist you could not income average more than one year in a row; the rate of client audits was far higher and there was no 8829. Anybody want to cue the Archie Bunker theme song? | |
| 1 May 2008 | |
| When you can use a cellphone and have no other phone to use, get free long distance and pay, what $75/mo for 1,000 min or something like that, what exactly are we looking at in tax savings that the IRS insists on making such a big deal of this? Yes, I am conservative and yes, I (almost always) allocate at least some portion of cell phone expenses to personal, but this is just another example of many examples of dumb, abusive tax laws. These days, and I have a love/hate of cell phones, who can do business without one? Not many people and for these laws to restrict/limit what's probably innocuous anyway, is ridiculous! So, as well, are the restrictions on home office telephone deductions. I opt not to have a home phone, but when/if I move my office to my home, I will have a 'home' phone, but only because my business is there. As great as cellphones can be, you still do not get the same clear reception that a land line provides. And what about faxes? For various reasons, I don't fax via computer and still want/need a land line for a fax. So, when I have this one line into my home that I'm only getting because my business needs it, I'll lose the ability to deduct the monthly cost. Tell me that makes any sense. | |
Donniecastleman (talk|edits) said: | 1 May 2008 |
| At the ONE client audit that I've had in 16 years the auditor was fine with 75% of the cell and internet as business deductions, surely an auditor isn't going to show up and take hours sifting through pages and pages of calls to determine the exact amount of deductibility, of course I don't put anything past the IRS. | |
Death&Taxes (talk|edits) said: | 1 May 2008 |
| Before cell phones really exploded, and after 1988 when Congress passed the provision in Sec. 262, I usually found that those who installed a separate line to use for business would continue to make their outgoing business calls on the personal line, so they could keep the business line free! Do remember that Congress was only speaking of the base cost of a landline in the home: if it can be demonstrated that calls were made for business, or services were added for business, auditors I have had accept these, even call waiting.
Of course it is dumb law, but believe me, where I worked pre-1988 'Telephone on call' was a standard miscellenous deduction, or a 2106 deduction before the 2106 moved to Sch A. Was this right? I can only say it was unclear. Had an audit for the Purchasing Manager of a major hospital, who was on call according to his employer letter and job description. Auditor wanted to throw out the deduction and said to me, "My husband is a fireman and he doesn't deduct telephone on call." I pointed out that she could not very well write up the disallowance based on what her hubby did and peace broke out since the client had great records of his other items. | |
| 1 May 2008 | |
| LJA - hey, at least you can deduct the bells and whistles on that land line :-). | |
