Church Cell Phones in 2 Steps
By Raul Rivera
Back in the days when VCR's and 8-track tapes were a blessing, cell phones were rare and expensive. They were so expensive that the Motorola DynaTec phone cost a whopping $3,500. Naturally, wealthy executives who could not only afford the cost of purchasing one, but also the phone bill, which could run in the thousands of dollars per month, were the only individuals who used cell phones. Because the value that a wealthy executive would receive from using the company cell phone for both business and personal use was so big, Congress passed a law that made the issuance of an employer-provided cell phone to an employee a taxable fringe benefit to the employee; and only to the degree that the employee kept meticulous records on the minutes that were used for business were those minutes allowed to be excluded from taxable income. If the employee did not keep adequate records, then 100% of the phone and the monthly phone bills were counted as taxable income. When that law was passed no one in the church world took notice because pastors back then did not have cell phones. But oh, how the times have changed! Now, every pastor and church employee has a cell phone. While that is great, there is one thing that is not: most churches did not get the memo that Congress passed a law against the way churches pay the bill.
Small Business Jobs Act
Now, a little more than 20 years after the law made church provided cell phones a taxable fringe benefit to the pastor, Congress has reversed itself and passed the Small Business Jobs Act of 2010. As a result of that law, the IRS published Notice 2011-72, which states that if the church provides the pastor or employee a cell phone "primarily for non-compensatory business reasons," then the value of that cell phone is considered an "excludible fringe benefit." Finally, effective retroactively to January 1st, 2010, when a church pays for the pastor's cell phone it is no longer taxable to the pastor.
How to do it in 2 steps
The correct way to ensure proper documentation that a church provided cell phone has a legitimate church business use is to follow the steps below. If you follow these steps, you will not have to keep track of personal and business minutes, even if the church pays for an account with unlimited minutes.
- Make sure the church owns the telephone and account
- Make sure that you write either a job description or an employment agreement that indicates that the cell phone is provided by the church and required as a condition of employment. Our software Suite the Compliance Kit can create an employment agreement and a job description for you.
So, What About My iPad?
So the real question is, can the church purchase an iPad and give it to the pastor or other church employee for both the church and personal use and it be treated like a cell phone? I think so! In Notice 2011-72, the IRS uses the term "cellular telephones or other similar telecommunications equipment." Because of the use of the term "other similar telecommunications equipment", an iPad provided by the church may also be considered the same as a cell phone. This is due to the fact that in many ways iPad's simulate a cell phone since they primarily work as telecommunications equipment that allows the pastor to communicate with the church office and members of the church, much in the same way he/she would do using a cell phone. In my opinion, the iPad and iPad 2 resemble similar telecommunications equipment because of their ability to send and receive calls using Face Time (trademark of Apple, Inc.), Skype (trademark of Skype), free apps, and messaging.
If My iPad Qualifies, Why Not My Laptop?
"Hey, wait a minute," you may be saying. "My Laptop has Face Time, Skype and messaging, so can I get the church to pay for it as a tax-free working condition benefit? Doesn't it qualify as similar telecommunications equipment?" Unfortunately, Section 280(d)(4)(B) specifically prohibits a laptop from being classified as a working condition fringe benefit. The church will not be able to treat it like a cell phone.
What You Do Not Know Can Hurt You
Your dream is too precious to not know the new laws and IRS requirements. I invite you to attend our Ultimate church Structure Conference. It is a full day of intensive, empowering information. This is essential information that you simply cannot do without. I promise you that you are unlikely to hear anywhere else what I will teach you. Why? The answer is pretty stark: for the most part, legal and accounting professions have completely overlooked the needs of the church and ministry community. As a result, most pastors and churches do not have the knowledge they need to take full advantage of the benefits available to them. And even more worrisome is that most churches unknowingly violate IRS code on a regular basis...something that in this day of ever-increasing IRS scrutiny, is very dangerous indeed. Just see what others who have attended say about this conference. Click here for testimonials.