Employees invariably use their company-issued mobile devices for both business and personal use, complicating mobile device management and administration.
Tax liabilities of mobile device
The IRS requires that businesses track the value of the personal use of enterprise-owned mobile devices and include that value in the employees' W-2 tax forms. Whether the wireless device is personally owned and the employee submits expense reports for business use, or the wireless device is owned by the enterprise, mobile device administration can create tremendous expense for the enterprise.
The IRS Notice 2009-46 requires that businesses document the following:
- The business reason for the wireless expenditure.
- The date and time of the use.
- The amount of the expenditure, which should include the acquisition cost, cost of business use and the total amount of use.
Wireless devices are on a par with cars, computers and cameras – they are things that can be provided by a business that also can be used for personal purposes. The penalties for not complying with the IRS rules, specifically IRS tax code 280F(d)(4)(A)(v), can be severe.
Some colleges have recently found to their dismay that they did not keep adequate records and ended up with considerable financial penalties. The University of California, San Diego, had to pay $186,471 in IRS taxes, while the University of California, Los Angeles, paid $239,196. The IRS has 10 years to collect back taxes.
Challenges of wireless management
Managing wireless usage involves more than potential tax liabilities. As the number of wireless devices increases, more IT personnel are required to manage wireless device operations and billing. As the applications for wireless devices proliferate, so does data usage, which in some cases exceeds the rate of telephone usage.
- How much does your enterprise spend on wireless devices and services?
- How does the enterprise distinguish personal and business charges?
- How many different wireless plans are in use?
- Is there a way to reduce expenses without limiting wireless usage?
To develop a wireless device management strategy, consider the following issues associated with the business/personal costs of mobile devices:
- Who bought the device -- enterprise or employee?
- Is the wireless plan paid by the enterprise or employee?
- If the enterprise owns the plan, how are the charges differentiated between the employee and the enterprise? Does this satisfy the IRS rules?
Claims for wireless business usage are about 30% higher than the actual cost according to Lyrix Inc. It is difficult to discern whether the expense report includes personal calls and whether the higher costs are round-up errors or due to poor wireless plan selection. The enterprise could significantly reduce its external and internal costs if provided with a global view of all the wireless device usage.
Research indicates that there is a shift in the personal liability of employee-owned mobile devices and plans, which further complicates wireless management:
- In 2008, the Yankee Group reported that 47% of enterprise users were on personal liability plans.
- In 2009, the Yankee Group again reported a 50% increase in personal liability plans.
- In 2009, I-Stat Research reported a 55% increase in personal liability plans.
This trend increases the IT department's challenges in controlling wireless costs.
- The struggle to accurately separate personal from business-device use and accurately reimburse employees.
- Complying with the IRS requirements.
- The continuing rise in personal liability plans, which adds more burden to the IT department.
According to an article in The Voice Report, an information service for telecom professionals:
"Democratic Sen. John Kerry of Massachusetts introduced legislation (S.144) on Jan. 6 that aims to repeal the current regulations [VR 1/29/09]. The bill, with 45 co-sponsors, has not made it out of the Senate Committee on Finance. A companion bill (H.R.690) was proposed in the House on Jan. 26, 2009 and is still in the House Committee on Ways and Means."
This solution assumes that there is not a viable way to streamline the IRS reporting process. However, widespread adoption of smartphones and the many smartphone applications make possible another wireless management solution.
Lyrix, for example, offers a SaaS (Software as a Service) app called Mobiso 6, designed to help businesses resolve mobile device reporting problems. Mobiso 6 addresses IRS reporting issues by leveraging a phone-resident app and the cloud to collect usage information and provide services across multiple wireless phone platforms and service providers.
The Mobiso 6 interface is the same for all users, independent of wireless device or plan. The smartphone SaaS app collects usage details and automates the process of expensing businesses and personal mobile device usage. This saves considerable time and ensures the accuracy of the reports. The SaaS solution also automates the accounting of expenses for the user.
The Mobiso app is supported in BlackBerry phones and will be available for the iPhone soon. The Mobiso solution is also compatible with Symbian, Microsoft Windows Mobile, Internet Explorer 6.0+ and Mozilla Firefox 2.0+.
About the author:
Gary Audin has more than 40 years of computer, communications and security experience. He has planned, designed, specified, implemented and operated data, LAN and telephone networks. These have included local area, national and international networks as well as VoIP and IP convergent networks in the U.S., Canada, Europe, Australia and Asia.
This was first published in February 2010