Are Cell Phones Considered a Business Expense?
Cell phones can be a viable business deduction on your tax return. However, this depends heavily on how the cell phone is used throughout the course of the year and your ability to prove it. Both employees and self-employed individuals can claim cell phone deductions on their taxes. Understanding IRS rules surrounding cell phone deductions can save you hundreds of dollars in hefty fines.
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Professional Necessity
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Some employers require access to employees via cell phone. They might provide you with a phone or request that you use your own phone to conduct business. In cases where you must use your cell phone to perform your job duties, your unreimbursed cell phone costs can be deducted on your personal taxes. However, you must meet the minimum unreimbursed employee expense requirements. Bankrate.com contends that "these deductions don't do you any good until they come to more than 2 percent of your adjusted gross income." Any costs incurred on your cell phone below 2 percent are your personal responsibility.
Entrepreneurs
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Like a computer, printer or fax machine, a cell phone helps entrepreneurs conduct business. Small-business owners have the option of deducting their cell phones as a business expense in most situations. However, "the smaller the business, the more the IRS is likely to question attempts to write off 100 percent of the costs of computers, cell phones and other hardware that most people use for personal purposes at least part of the time," explains Reuters. Small-business owners should maintain two phone lines to substantiate the exclusive use of one line for business. This helps to lessen discrepancies when audited.
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Employee Cell Phones
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Employers often provide employees with cell phones. Like individuals, companies may be required to prove that cell phones issued are for exclusive business use before they are allowed to claim the deduction. Employers might use an employee cell phone policy form to support their business expense deduction. " The employee cell phone policy outlines the guidelines and limitations of cell phones provided by the business or the employees own personal cell phones," explains Inc. magazine.
Record-Keeping
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Any individual or entity seeking to claim a cell phone as a business expense on a tax form must have adequate documentation. Maintain phone records, bills and receipts related to your phone. When being audited, your responsibility to provide this information is called your burden of proof. The IRS may look as far as your itemized call list to determine whether your claims are correct.
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