Cell phone stipend

[netskyblue]

I'm about to start a new job, and one of the "perks" I negotiated was a cell phone stipend.  They're going to pay me more per month than my cell phone bill typically ends up being.  (More than double, actually.)

Is it okay to use that money for things other than cell phone, or do I need to earmark and use it that way?  I'm not talking about ethics per se, but I believe cell phone stipend is pre-tax (or at least, some taxes), and am I going to get into trouble if I get audited and can't prove I'm spending that much on a cell phone?  I don't think I'm at all likely to GET audited, but I'd like to at least know whether what I'm doing is kosher or not.

[patchyfacialhair]

Unless your employee handbook stipulates spending ALL of the stipend of cell phone plus cell phone bill, you're in the clear.

Another curveball is if your stipend is "up to" $XXX in cell phone reimbursement. In that case, you may be required to provide copies of bill/receipts each month to get paid.

Generally though, a "stipend" is just straight cash to you, where it's up to you how you earmark the money.

[CoffeeAndDonuts]

Is the stipend given to you pre-tax or post-tax? If it's not clear, a paystub and some time on https://www.paycheckcity.com/calculator/salary/can usually figure it out.

If post-tax, I don't think you have any IRS issue whatsoever.

If pre-tax, that raises some separate questions. Namely the whole personal use vs. business use issue. It's a ridiculous rule that I suspect is widely ignored but a rule nonetheless.

As to ethics, as a business owner, I'd not have a problem with you finding a great cell phone deal. That said, we used to actually pay for employees phones, service, etc. As of early 2017, we just gave everyone a raise at about $40/mo and stopped that. It just wasn't worth dealing with any more. And we've declined to get into mobile phone subsidies since. A good portion of our company went to Google Fi. Anyway, getting off topic now.

[netskyblue]

I was told by my soon to be supervisor that it is pre-tax, a set amount, and I do not need to provide the company with receipts.  He also knows the amount exceeds my normal cell phone bill, but said he was "authorized" to give me that much.  It was an offer made in part because he wasn't "authorized" to give me the increase in salary I was asking for.  (Not that this amount remotely approaches the salary amount I was asking for, but it's something he used to improve the deal.)

[Jenny1974]

We have a cell phone plan here too.  We have to provide our statement once a year I believe to support what we're getting reimbursed.  That supports our documentation requirements for the IRS so the benefit is tax-free.

[netskyblue]

I could just use the remainder to buy a new phone if I legally have to use it for phone related things, I'd just rather not, if I don't "have" to.  Since my employer knew when he made the offer that it was more than I was paying for monthly cell phone service, I'm not hung up on the ethics of taking advantage of an employer.  I just don't want to unwittingly commit tax fraud or something.

[jlcnuke]

Normally, cell phone and other such "stipends" are classified as "expenses" paid to you and are thus not income. However, per the IRS, any amount above what it costs to pay for that "non-compensable business expense" (the costs of you to have the phone and phone plan) must either be returned to the employer or it is taxable income.

However, you'd be hard pressed to find anyone that was ever audited to see if their cell-phone charges were actually greater than their cell-phone stipend from their employer.

http://www.cpapracticeadvisor.com/news/12226455/2016-fringe-benefits-tax-series-4-cell-phones-can-be-a-tax-free-employee-benefit

[netskyblue]

However, per the IRS, any amount above what it costs to pay for that "non-compensable business expense" (the costs of you to have the phone and phone plan) must either be returned to the employer or it is taxable income.

I do like being law-abiding, can I just report it as taxable income and pay the taxes on it?

[misshathaway]

I'm about to start a new job, and one of the "perks" I negotiated was a cell phone stipend.  They're going to pay me more per month than my cell phone bill typically ends up being.  (More than double, actually.)

I assume b/c you will be using it for work. Do they want to install any apps on it? If so, you may be paying with your privacy.

[jlcnuke]

However, per the IRS, any amount above what it costs to pay for that "non-compensable business expense" (the costs of you to have the phone and phone plan) must either be returned to the employer or it is taxable income.

I do like being law-abiding, can I just report it as taxable income and pay the taxes on it?

I can't say for certain what the "right" way is to go about it (you'd have to ask a tax professional for that info probably, and that's not me, I just like to learn stuff on the internet). Personally, I wouldn't bother with it as I think the only way it would actually ever come up would be if you dated an IRS auditor and had a bad breakup after telling them about your great deal... which is to say the likelihood of getting hit by an asteroid while winning the lottery is a more probable event.

[netskyblue]

Alright, well it's $70/mo which is well within a lot of people's regular cell phone spending, so it isn't likely to raise any red flags due to dollar amount.

I don't have to put any apps on my phone, but will need to be available by phone when working from home and monitor my work emails at odd hours.

[Catbert]

However, per the IRS, any amount above what it costs to pay for that "non-compensable business expense" (the costs of you to have the phone and phone plan) must either be returned to the employer or it is taxable income.

I do like being law-abiding, can I just report it as taxable income and pay the taxes on it?

I can't say for certain what the "right" way is to go about it (you'd have to ask a tax professional for that info probably, and that's not me, I just like to learn stuff on the internet). Personally, I wouldn't bother with it as I think the only way it would actually ever come up would be if you dated an IRS auditor and had a bad breakup after telling them about your great deal... which is to say the likelihood of getting hit by an asteroid while winning the lottery is a more probable event.

+1  Your chances of being audited, especially if you take the standard deduction are almost zero.  The worst that could happen is that you'd owe taxes and penalties on several hundred dollars.  I'd take my chances.

[frugalnacho]

I pay $0 (free year with sprint) and receive a $40 stipend from work.  Before I switched to sprint I was paying about $20/mo for republic wireless. 

There was much confusion when the policy was rolled out, and they required us to provide receipts to receive the stipend (I'm not sure why, the very fact you can call my cell phone number and reach me should be proof enough I have a phone), so I inflated my monthly service to the $40 plan to receive the full stipend. 

The stipend is not considered income and does not show on our W2.