But over time, the cost of employee cell phone reimbursement can dwarf that of the new phones you purchase. Employers are required to withhold and timeously pay to SARS employees’ tax based on an employee’s remuneration (including taxable fringe benefits) and failure to pay the appropriate amount of employees’ tax to SARS may result in penalties and interest being levied against the employer over and above the amount of employees’ tax outstanding. As commodity prices fluctuate and environmental concerns continue to draw the attention of regulators, the Natural Resources industry is facing more pressure than ever. Esther van Schalkwyk, Senior Tax Consultant at BDO South Africa unpacks some of the important aspects of cell phone allowances and highlights the value of proper tax planning. The type of reimbursement plan administered by the employer is important for employees because it can have a significant impact on the employees' tax liability. The financial services industry is under pressure from several areas. • You have an unlimited cell phone plan (meaning, you incurred no “extra” charges for your work-related calls). Your employer should reimburse you a reasonable percentage of your cell phone bill. A. By Remy Kessler and Ian A. Wright On August 12, 2014, the California court of appeal issued a sweeping decision that may spark a new wave of … Keep careful records, such as an itemized phone bill, so you can prove your deduction is valid in the case of a tax audit. We combine our extensive knowledge and in-depth understanding of your goals and vision, so we can help you... For the last several years, retail and consumer product companies have competed in a rapidly evolving industry. . “We hold that when employees must use their personal cell phones for work-related calls, Labor Code section 2802 requires the employer to reimburse them. “Reimbursements for expenditure incurred by employees on the instruction of their employer for business purposes should not be included in the employee’s taxable income or be subject to employees’ tax. Learn more. In 2019, Illinois passed new law regarding reimbursement by employers. Van Schalkwyk concludes by saying that it is advisable that the terms of use for company cell phones and telecommunications services be properly documented in an employment policy document and consistently applied. The public sector is facing many challenges. The expense reimbursement process allows employers to pay back employees who have spent their own money for business-related expenses. Van Schalkwyk concludes by saying that it is advisable that the terms of use for company cell phones and telecommunications services be properly documented in an employment policy document and consistently applied. Employees often receive company cell phones which may be owned or leased by the employer. If a telecommunication service (such as data downloads on Whatsapp or viewing Youtube) is provided to employees for enjoyment solely at their place of work, no value is likewise placed on the private use. The use of cell phones for work is increasingly popular as employees remain in contact beyond the office or even work remotely. You may be entitled to reimbursement going back three years. My company is in the process of updating our T&E policy and we have been asked to find out what other companies are doing with cell phone reimbursement. Learn more. A belated attempt by employers to recover accumulated employees’ tax from employees may cause widespread staff dissatisfaction and should be avoided,” warns van Schalkwyk. Some even compare it to unauthorized overtime. The taxable benefit is limited to the portion attributable to the private use. Discovery Benefits makes managing your FSA expenses and reimbursement easier by providing convenient reimbursement options. 1. The outcome of your case will depend on your specific circumstances. I understand that I will receive a flat amount of $____ per month to reimburse me for business use. You’ll decide on your own reimbursement levels, but we suggest $30 to $50 for low business use and $60 to $75 for high businesses use. Or do you want to provide company phones? . Reimbursements of private expenditure will be subject to taxation in the employee’s hands and be subject to the withholding of employees’ tax.”, “A predetermined cell phone allowance that is not linked to actual business expenditure should be included in the employee’s taxable income and be subject to the withholding of employees’ tax,” says van Schalkwyk. This new law requires all employers to reimburse their employees for any expenses incurred within the scope of their employment. • Your cell phone company wrote off your bill as a loss (that’s private). I will use my personal cell phone for business calls when I am designated as a lead. Reimbursement is compensation paid by an organization for out-of-pocket expenses incurred or overpayment made by an employee or another party. 1.1. The taxable benefit of the use of free or cheap services (such as Whatsapp, Viber, Facetime) is the cost to the employer for the services, less any consideration payable by the employee. Copyright to all content presented on this website is owned by BDO South Africa Services (Pty) Ltd except where other sources are indicated. Without a stipend in place, staff members can sue their employers for associated costs. I was wondering if you might be able to provide some insight. Intellectual property and other rights are retained by BDO South Africa Services (Pty) Ltd. While these laws vary from sta… • Your cell phone company wrote off your bill as a loss (that’s private). BDO South Africa Incorporated, a South African personal liability company, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. 1.1. We understand that running your own business, or being in business with family, comes with many advantages as well as challenges. If a telecommunication service (such as data downloads on Whatsapp or viewing Youtube) is provided to employees for enjoyment solely at their place of work, no value is likewise placed on the private use. Contact the Law Office of China Rosas for a free consultation. In the case of the use of a company cell phone or a telecommunication service, no taxable benefit will arise if the cell phone or service was used mainly for the employer’s business purposes. Cell phone allowances are a non-taxable benefit for employees and do … • You have an unlimited cell phone plan (meaning, you incurred no “extra” charges for your work-related calls). It is common for employees to receive cell phone allowances intended to cover legitimate business use of personal cell phones. Although not authoritative, the Memorandum accompanying the Notice does provide some guidance in instructing IRS agents to analyze such reimbursements in a manner similar to that set forth in the Notice. Expense reimbursement: In a typical reimbursement policy, employees purchase a cell phone (from a list of company-approved devices) along with the service plan. The following memo was just released by the IRS and is addressed to IRS auditors on cell phone usage and reimbursement by employers of employee personal cell phone for business usage and the employer paid cell phone used for some personal usage by the employee. Call Attorney Rosas today. The Tax Cuts and Jobs Act (TCJA) redefined the deductibility of business expenses, resulting in disallowed deductions for out-of-pocket expenses paid by employees on their personal tax return. If your employees need phones mostly for sales and support capacities, then webphone options could be even more attractive to you, because most of the best apps have excellent features that are specifically made for call center-type organizations – features that will make it easier for your employees to manage their calls and easier for you to monitor the quality of their work on the phone. A similar exception is available as above in that if the services are used mainly (meaning more than 50%) for the employer’s business purposes, no value is placed on the private use and no taxable benefit arises. “Reimbursements for actual proven business expenditure are not taxable whereas predetermined cell phone allowances are generally fully taxable and subject to employees’ withholding tax.”, “The structuring of employee fringe benefits can have far reaching tax consequences and should be done in consultation with a tax advisor.”, Subscribe to receive the latest BDO News and Insights. UNM Main Campus employees (faculty or staff) who require a cellular telephone in order to perform their duties may, with approval of their Dean or Director, receive a monthly payment of $40 (or less if determined appropriate per departmental budgetary needs) from the University to reimburse them for business usage of their … What Is Expense Reimbursement? These laws protect both employees and employers. Many employees receive a cell phone allowance in some form or other as part of their employment remuneration package. Call center features are withheld from your employees under a BYOD cell phone policy. The employee must maintain the type of cell phone coverage that is reasonably related to the needs of the employer’s business, and the reimbursement must be reasonably calculated so as not to exceed expenses the employee actually incurred in maintaining the cell phone. The Notice does not address the tax treatment for cash reimbursement from an employer to an employee for that employee's use of his or her personal cell phone for business purposes. “Reimbursements for actual proven business expenditure are not taxable whereas predetermined cell phone allowances are generally fully taxable and subject to employees’ withholding tax.”, Cyber, Innovation, Assurance and Analytics (CIAA), Issues that Can Impact Your Business When Investing In Africa. It is evident that cell phone allowances can take a variety of forms and in each case it is important to determine whether a taxable fringe benefit arises. reimburse definition: 1. to pay back money to someone who has spent it for you or lost it because of you: 2. to pay back…. The tax regulations of cell phone reimbursement boil down to three questions the company must answer: 1. Synonym Discussion of reimburse. Q. If 30 percent of your time spent on your cell phone is used for business, you can deduct 30 percent of the cost of your cell phone bill on your taxes. In the Begin Date you will select the link and select the beginning day of the month you are requesting reimbursement for. There are actually laws surrounding what employees are entitled to when it comes to compensation for personal cell phone use. All rights reserved. Whether the employees have cell phone plans with unlimited minutes or limited minutes, the reimbursement owed is a reasonable percentage of their cell phone bills.” (Cochran v. To complete the icon gallery, you should also save these verizon cell phone symbols, lg cell phone icon glossary and verizon cell phone icon symbol meanings. Implement a two-tier system that applies to everyone in the church who needs cell phone reimbursement. Does your employer require or has your employer asked you to make work-related calls on your personal cell phone? Cell phone reimbursements . cell phone definition: 1. a phone that is connected to the phone system by radio instead of by a wire, and can be used…. You will enter your cell phone number in the Cell# field. If so, you may be entitled to expense reimbursement under the law. This means you won’t have to include them in your end-of-year reports. I understand that if this amount does not fully reimburse me for the reasonable value of the use of my personal cell phone, I should request approval for reimbursement of the excess charges. Benefits Debit Card: Swipe the debit card to instantly pay for eligible expenses and avoid out-of-pocket costs. If the employee is granted the sole right of use over the assets useful life or a major (meaning more than 50%) portion thereof, the value of private use is the cost of the asset to the employer, and this benefit accrues to the employee on the date on which the employee is first granted the right to use the asset.”, According to van Schalkwyk, a notable exception is available where the asset consists of telephone or computer equipment which the employee uses mainly (meaning more than 50%) for the purposes of the employer’s business. In this case no value is placed on the private use and no taxable benefit arises. M any IP phones cost under $50, a figure you'll more than recoup when you stop paying for your employees' cell phones. for work-related purposes and that the employer would therefore have no reimbursement obligation to these employees. Pay a set dollar amount to lighter cell phone users and a higher dollar amount to more frequent users. “Employers are advised to document the terms of use for company cell phones in a formal policy document which is consistently implemented. Reimbursement of employee cell phone expenses is governed by California Labor Code Section 2802, which provides: An employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer . Some mobile phone expenses are covered by exemptions (which have replaced dispensations). December 3, 2018. Our industry professionals have extensive experience in helping clients navigate the many challenges affecting the Technology industry. You may be entitled to reimbursement going back three years. The cell phone reimbursement can be paid monthly by the department as long as a new form is submitted at least annually, at the start of each fiscal year. How much should you reimburse each employee? Due to research that indicates that smartphone or cell phone use while driving is dangerous, and may even approach the equivalent danger of driving while drunk, according to some studies, your company prohibits employee use of personal cellular phones, either hands-on or hands-free, or similar devices, for business purposes related in any way to our company, while driving. Despite these employment benefits being relatively common, some employers and employees still run into unexpected tax consequences. Looking for the latest Industry/Sector news? The provision of free or cheap services arises where an employee uses a telecommunication network at the employer’s cost (for example call charges or data downloads). A "necessary” expense is defined in section 9.5 as all reasonable expenses that: (a) are required by the employer in the discharge of the employees’ duties; and (b) are primarily for the benefit … The taxable benefit is limited to the portion attributable to the private use. The company then reimburses the initial cost of the cell phone and the service plan fees each month on receiving the associated receipts. Our Frankly Speaking Podcast series has you covered. Main Campus Cell Phone Service Reimbursement Program; FY21. The cell phone reimbursement agreement must be approved by the Executive Director, who, upon the recommendation of a member of the senior management team, makes a determination that a cell phone is required in the performance of official duties. On the flip-side, employees may beliable for compromising secure company information. Reason #2: Call Center Features. Two distinct taxable benefits may arise, namely the employee’s right to use an asset for private or domestic purposes and the employee’s use of free or cheap services at the employer’s cost for private or domestic purposes. “Reimbursements for expenditure incurred by employees on the instruction of their employer for business purposes should not be included in the employee’s taxable income or be subject to employees’ tax. (meaning more than 50%) for the employer’s business purposes, no value is placed on the private use and no taxable benefit arises. “Such allowances generally form part of the employee’s taxable income without any deductions or reductions.”, It is evident that cell phone allowances can take a variety of forms and in each case it is important to determine whether a taxable fringe benefit arises. Offering cell phone reimbursement isn't just about being a kind-hearted boss. This can include several expenses, including personal cell phones. This law is meant to prevent employers from passing on business operating costs to employees. When employees receive an expense reimbursement, typically they won’t be required to report such payments as wages or income. “The taxable benefit of the right to use an asset is the value of the private use less any consideration payable by the employee for the use, or any amount spent by the employee on repairs and maintenance,” says van Schalkwyk. 1. . At BDO, we have worked with a number of owner-managed and family-owned businesses for many years. If it can be shown that the employee uses the cell phone to perform the particular job and the employee is required to use the cell phone mainly for the purposes of the employer’s business, SARS will generally accept that no value be placed on the private use.”. Cell Phone Reimbursement Guidelines. Government is under pressure to accomplish more each year, and expenditure is under constant scrutiny. The cell phone expense reimbursement rule applies even if: • A family member or friend had paid your cell phone bill (it’s not your employer’s business). This article is intended for private, non-union employees.  Different rules may apply in other contexts. This is the case even if the employee used, lost, or damaged the cell phone or device while carrying out their employment duties. Under newly enacted section 9.5 of the Illinois Wage Payment and Collection Act (“Act”) (effective January 1, 2019), employers are obligated to reimburse employees for all necessary expenses incurred within the scope of their employment. The power of industry experience is perspective - perspective we bring to help you best leverage your own capabilities and resources. 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