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Mobile Devices: Policies & their Tax Implications

19 Sep 2012
Studies show that the access to business applications on personal mobile phones has risen significantly, showing that more people than ever prefer to use their own device, rather than one issued by their company. Taxand USA investigates the different policies, and their tax implications, on offer in the States.

A stipend is treated as wages to the employee on Form W-2, and is subject to income tax and employment tax withholding. The stipend is treated as additional wages because the payment is not made in accordance with Accountable Plan Rules.

Employer All-Inclusive

For an employer all-inclusive policy, the employer provides the employee with both the mobile device and service plan at no cost to the employee. Therefore this would be considered as a working condition fringe benefit to the employee, exempting them from paying tax.

Employees are instructed to purchase a mobile device and monthly service plan by their employer to use for business purposes. The employer then reimburses the employee each month upon receiving substantiating documents (i.e., expense report with accompanying receipts). The reimbursement is excluded from the employee's wages, therefore exempting them from paying tax.

BYOD (Bring Your Own Device)
This requires employees to have a mobile device for business purposes. Employees use their personally-owned mobile device, and the employer provides the service plan. If the entire cost of the mobile device is borne by the employee, there is no impact to the employee's wages reported on the Form W-2. In fact, the employees may be entitled to take an itemised deduction (subject to a 2 percent of adjusted gross income limitation) on their personal tax return.

Discover more: Device Policies and Applicable Tax Rules

Taxand's Take

With mobile devices becoming the increasingly popular channel for accessing the internet, policies and taxation queries are becoming big issues for multinationals. Companies should ensure they have set guidelines in place for their employees to follow, as well as choosing a policy which is most tax efficient for them. Organisations should know that policies will differ per country.

Your Taxand contact for further queries is:
Robert N. Lowe
T. +1 212 328 8721

Taxand's Take Author