First Telephone Not Deductible?

[zeros]

Had client who had no land phone (like many) and then started self-employed business and installed one. She has owned a cell phone. The land phone is the one she uses for her business. Does she have any deduction for the phone? (Either one?)

[FEDUKE404]

It depends. . .

Had client who had no land phone (like many) and then started self-employed business and installed one. She has owned a cell phone. The land phone is the one she uses for her business. Does she have any deduction for the phone? (Either one?)

If the landline is listed/billed to "Sue's Business" then you probably can deduct the cost of the phone.

OTOH, if the phone is listed/billed to "Sue Smith" then you run into the clearly-stated IRS rules for never deducting the cost of the first landline to any residence.

As to how/when the IRS will play a similar game for cell phones....who knows?!?

FE

[Koss]

First Landline

There was a rather exhaustive discussion of this issue last year.

The thread begins here:

http://forum.thetaxbook.com/showthread.php?19247-home-phone

My own long-winded take on it, which is informed by my experience in the telecommunications industry, is embedded within the thread here:

http://forum.thetaxbook.com/showthread.php?19247-home-phone&p=133060#post133060

BMK

[Kram BergGold]

What I would do

If the client says the land line is 100% business and there is only one jack and it is in the office then I would deduct it and then maybe a small % of the cell phone if the person is outside the office alot like a plumber. If the land line number is given out to even one friend then no deduction and then I would take a percentage of the cell.
I put no credence on the name on the phone bill. To me use and phone jack placement dictates the treatment.

[taxea]

I agree with Kram except having the line billed to the business shows documentation of "alleged" used and can be argued that the cel phone is the personal line. Should the IRS ask for a copy of the billings....there best not be any personal calls on the bills. I think the IRS has not caught up with progress in this area.

[FEDUKE404]

Faulty logic, perhaps?

If the client says the land line is 100% business and there is only one jack and it is in the office then I would deduct it and then maybe a small % of the cell phone if the person is outside the office alot like a plumber. If the land line number is given out to even one friend then no deduction and then I would take a percentage of the cell.
I put no credence on the name on the phone bill. To me use and phone jack placement dictates the treatment.

You may wish to read page 17 of IRS Pub 529.

http://www.irs.gov/pub/irs-pdf/p529.pdf

Excerpt:

Residential Telephone Service

"You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business."


As Koss and others have mentioned, there is a very broad range of possibilities re "cell phone #1"....but apparently NOT for landline #1.

FE

[taxea]

You may wish to read page 17 of IRS Pub 529.

http://www.irs.gov/pub/irs-pdf/p529.pdf

Excerpt:

Residential Telephone Service

"You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business."


As Koss and others have mentioned, there is a very broad range of possibilities re "cell phone #1"....but apparently NOT for landline #1.

FE

With the TPs okay after I have explained the possible risks, I would take it as I said before, and argue the point with the IRS if needed. I first, would be sure I have enough documentation to pursue this stance. I base my experience, expertise and reasoning on the IRS being a step behind with the advent of cel phones. Perhaps one would have to subtract out some of the fees on the bill but I don''t see why. If the TP's personal phone is a cel and the landline is used strickly for business it, IMO, can be argued that it is, in fact, a second phone.

[FEDUKE404]

Arguing when the facts are counter to the rules?

With the TPs okay after I have explained the possible risks, I would take it as I said before, and argue the point with the IRS if needed. I first, would be sure I have enough documentation to pursue this stance. I base my experience, expertise and reasoning on the IRS being a step behind with the advent of cel phones. Perhaps one would have to subtract out some of the fees on the bill but I don''t see why. If the TP's personal phone is a cel and the landline is used strickly for business it, IMO, can be argued that it is, in fact, a second phone.

Interesting approach....VERY interesting approach!

I would find it quite difficult to take a position that could evade the "first telephone line to your residence" IRS restriction cited above.

Of course, a more valid issue to consider is that it's my understanding that the telephone companies charge substantially more for a "business" landline phone than they do for a "personal" landline phone. The absence of a "business" account for the home telephone could make the climb up that mountain of proof even more difficult.

FE

[Koss]

First Telephone Line

In last year's discussion, I advanced an argument that a cell phone could be considered the first line of service provided to a residence. If this is the case, then a landline would not also be treated as the first line in the same residence.

My argument was based on a number of factors. You can read the post here:

http://forum.thetaxbook.com/showthre...060#post133060

Among other things, I believe that one can reasonably argue that the very definition of a "telephone line" has changed significantly over the last 40 years. Furthermore, for tax purposes, wireless service is tied to a specific address.

Before you respond to these assertions, I urge you to read the complete post from last year.

BMK

[taxxcpa]

The word "line" has a lot to do with it. If that word was replaced by something that did not imply a line vs a cell phone, then it would be much easier to consider the "line" as the second telephone.

I used to have two lines. One was for a fax line before I switched to e-fax.
I deducted the fax line. Both lines were billed at residential rates.

[oceanlovin'ea]

it is my understanding that the charge for the land line cannot be taken as a deduction, but the add-ons such as caller ID, call waiting, etc if that package costs extra can be deducted by using the reasoning that those add-ons are necessary to identify callers and to make sure no calls are missed.

My phone is provided by the cable company and there is one charge for the phone which includes all services and extras. But some people, like my mother, still has Verizon service. Her bill lists the package separately. So you almost have to see one of the phone bills to see what is charged.

Linda, EA

[Lion]

If the phone line does not go into the residence but goes only to a qualified home office, would your conclusion change?

[taxea]

Interesting approach....VERY interesting approach!

I would find it quite difficult to take a position that could evade the "first telephone line to your residence" IRS restriction cited above.

Of course, a more valid issue to consider is that it's my understanding that the telephone companies charge substantially more for a "business" landline phone than they do for a "personal" landline phone. The absence of a "business" account for the home telephone could make the climb up that mountain of proof even more difficult.

FE

My belief is "the worst they can say is no". If there is no criminal intent involved I see no reason not to ask. This, it seems to me, is totally reasonable and rational; and the IRS is truly behind the times on this issue.

Rather than taking the risk, you could call Special Counsel and ask for their response in writing before you complete the return. I would be interested on their take.

You are correct about the business account and most phone companies. Fortunately I don't list my phone numbers. All of my clients are by word of mouth. It keeps the riff-wraff away and lets me select which clients I choose to take on. I recently determined that my cel phone company will transfer my desk phones and they offer all of the perks that the phone company does, plus free unlimited call nationwide, at half the price. The only thing they don't handle is fax lines so I am going to change to online faxing.

[oceanlovin'ea]

on line fax

Taxea, be aware that when you use an online fax service, it will take your fax about 3 to 5 minutes to get to the person you are sending the fax to. On occasion, it has taken much longer. Usually that is no problem, but if you are on the phone with the IRS and wanting to fax a POA to them there will be a short wait. Most of the time they are willing to wait. So it isn't too big of a problem. It is just something you should know.
I have an online fax that costs $10 a month. I am fine with it. But I do have a line to my all-in-one machine. If I am calling IRS and know that I need to fax a POA to them, I will call on my cell phone and fax directly to them.

Linda, EA

[Roberts]

In last year's discussion, I advanced an argument that a cell phone could be considered the first line of service provided to a residence. If this is the case, then a landline would not also be treated as the first line in the same residence.

IMO that's a very reasonable argument.
IMO, the line is a silly argument and will be gone soon enough. VOIP means a physical phone line isn't a standard indication anymore. For most people's personal usage, MagicJack is a viable option.