OWU Allowance for Business Use of Personal Cell Phone and Other Services
This policy is effective as of August 1, 2007 and supercedes previous policies and guidelines regarding cell phones.
The use of cell phones has increased significantly in recent years, at OWU and at other institutions. The Internal Revenue Service, in recent investigations, has closely scrutinized the treatment of personal use of employer provided equipment and services, such as cell phones.
The IRS requires that a log, which records every call and its business purpose that is made or received on an employer provided cell phone, be kept by the cell phone holder. Maintaining a log is very time consuming and the cost may outweigh the benefit. Consequently, the University will no longer: 1) purchase cell phones, 2) pay vendors directly for monthly service, or 3) reimburse employees for monthly service or for purchases of related equipment. Rather, for authorized individuals, the University will provide a taxable monthly allowance for cell phone use and may provide a one-time taxable equipment purchase allowance.
Although the allowance is taxable, it is believed that the benefits to the employee outweigh the costs. The benefits include: 1) a log of calls is not required, 2) no monthly reporting is required, 3) phones may be used for personal calls and be combined or enhanced with other personal plans.
Administration of Allowance
If a supervisor deems it appropriate for a subordinate to receive a cell phone allowance, the supervisor is to provide written authorization using the Cell Phone Allowance Request Form(PDF*), with a University Officer’s endorsement, to the Business Affairs Office, indicating the amount of the allowance and the amount, if any, of a one-time equipment purchase allowance. Please note that the amounts must be within the limits established below. If a greater allowance is needed, it must be approved by the Vice President for Business Affairs.
The allowance must be based on the business requirements of the employee’s position and be within established limits. Allowances must be covered by the department’s budget. Although limits may vary, all allowances are considered taxable, without exception. The supervisor should use personal discretion, knowledge of the employee’s duties, and budget considerations to determine the amount of the allowance to be provided to each authorized employee.
Direct Payments by the University to a Vendor for Cell Phone or Internet Service
The University will no longer provide direct payments to a vendor for the purchase of equipment or monthly cell phone for an employee. Additionally, the University will not enter into contracts with vendors for employee use of cell phones. Given that a taxable allowance will now be provided for monthly service fees, the employee will be the direct holder of a contract with the cell phone company.
The use of University credit cards for monthly cell phone or for related equipment purchases is not permitted.
In order to avoid cancellation fees, and to allow for an orderly transition, anyone currently using a University owned cell phone, will have until the contract end period to comply with this policy. Until that date, University owned cell phones may be used for business calls only.
One Allowance Per Employee
Each employee authorized to have access to a cell phone for work purposes is to apply for his or her own allowance.
Once approved, the cell phone allowance is paid automatically each month and will be included in the employee’s compensation. Note that the allowance does not constitute an increase in base pay, and will not be included in percentage calculations for increase to base or determining non-statutory benefits. Appropriate payroll taxes on the allowance amount will be withheld from the paycheck, and the amount of the allowance will be included on the individual’s year-end W-2.
Upon employment termination the cell phone allowance stops.
On rare occasions a department makes a cell phone available for multiple individuals to use. If a phone is shared among many individuals, has no clear “owner”, and no personal calls are made on these phones, the phone can be paid from University funds. Individuals may be asked to sign a statement that no personal calls were made using the phone while it was in his/her possession and provide of log of business related calls made. Cellular phones that are affixed to University property (like vehicles) can also be paid from University funds.
These exceptions to the monthly taxable allowance (including the use of “non-assigned phones”) must be pre-approved in writing by the Vice President for Business Affairs.
The University holds a few contracts for Internet service and telephone service for employees required to have these services in performing their assigned duties. Consistent with the cell phone policy, the University will no longer directly contract with vendors for these services. Please contact Business Affairs to the taxable allowance related to these services. Also, these allowances must be covered by the department’s budget. Although the limits may vary, all allowances are considered taxable, without exception.