Dividing cell phone bill

[oceanlovin'ea]

How would you divide a cell phone bill that has more than one phone on it? For example, client has Sprint cell phone for his second business and the second phone on the bill is his wife's cell phone. He has another cell phone too.
The bill reads that the charge for the first cell phone is $100.99 plus taxes,etc. The charge for the second line is $8.50 per month. Of course, wife uses her cell phone much more than he uses his business cell phone. But charge is not based on usage but the plan.
Do you allow him to write off the majority of the $100.99 plus taxes? Or do you divide the bill in half and count half of the bill as a personal expense and half business?

The reason I am suddenly questioning this is that with my personal cell phone bill which I have another phone on the bill which is my other daughter's phone, I have always just divided the bill in half and then count half of my half as a business expense. Now I am wondering if I am doing that allocation correctly. Looking at the client's cell phone bill has me wondering.

Thanks for your imput. Linda F

[Snaggletooth]

Common problem

Hi Linda - we all run into this for people who have small businesses.

The IRS thought they had the problem solved a few years back when they passed a regulation which disallowed a deduction for the FIRST telephone line installed in a house.

That regulation is sorta obsolete. I don't think they can disallow cell phone usage for a business, especially if the taxpayer can't deduct the phone in his house. They also can no longer allow only long-distance since the cellphone charge is now based on minutes instead of distance.

That having been said, I think people are in a position to abuse this. I do remind them that the burden is still upon them in the event of an audit, but I hate to see them be too conservative.

I don't think you'll find a reliable guideline anywhere from anyone that can be applied consistently. 50% is too conservative if the other line is a spouse also in business, and too liberal if the other line is a teenage daughter. You will probably be judge and jury for these situations. I try to err in favor of my client (if at all), but am forthright about the deduction surviving an audit. Some families spend $4-$5K per year on cell phones.

[erchess]

Puzzled

Why not divide the bill by minutes used? That's what I do and I make my clients take all their bills and give me the figure they want me to use. They can figure as carefully or carelessly as they want but in the event of audit I will compile at a charge of $100 per hour on top of my regular audit charges unless they can show me that they have marked up their bills and done the math themselves. The simple thing to do is mark the personal calls and subtract them as the bills come in and then log the month's deduction in a log of some sort. Of course cell phones are listed property so if nonbusiness use is even approaching 50% one must be careful.

[S T]

Minutes

While I think all of the above are good approaches, I am still "puzzled" how to calculate.

Minutes, well I know that I have so many minutes on my phone #, and my husband has so many minutes, and I have an alternate office phone at so many minutes.

For one, we never use all of our minutes, and I am charged a flat rate per month for all 3 phones. So how am I going to break down minutes by each phone #. The phone company does not provide that info for me. They only provide excess minutes.

If one of the phone #'s goes over their allocation that would be easy to calculate as it is on the bill, but I have 3 #'s all under one flat rate amount per month.

Sandy

[Gene V]

Sandy,
I would write off what it would cost you for one phone. Say, 49.95 per month, now if you bought the
Family plan for add ional 9.95 per phone and paid 59.95 per month, I would still expense only 49.95.

It’s like when you travel overnight with your spouse and pay for a hotel room at double occupancy rate,
Your still only allow expensing what it would cost for single rate. (I believe this is spelled out in the regs.)

[erchess]

un puzzling I hope

Sandy, every phone bill I have seen lists the calls made and the minutes and the other number for each call. If that is not the case with your phone bills I have nothing to suggest.

I have the person place a small check on the bill beside the nondeductible calls. Obviously all calls placed on phones carried by spouse or kids are non deductible but so are (in my book) all calls to people with whom the business owner has any non business contact unless he wants to keep a log of calls and what is talked about. Most people after all attend community organizations or play softball or etc with at least some of the people with whom we do business and it isn't uncommon to mix business and personal on one call. You'd be considered very odd if when someone brought up a quick item of Church or Lodge business you asked them to hang up and call you on your personal phone. But the point is that there's no way anyone can know how much of your phone contact with these people is really business so out the calls go.

Now what you do is total the nondeductible calls and if this is not given, then the total calls. You then figure the percentage of nondeductible usage and take that percentage off the total bill off in figuring your deduction. You also obviously take out the extra fees for the extra phones carried by family members who do not work in the business.

Hope this is clearer.

[joanmcq]

Just got my latest cell phone bill, and AT&T no longer gives an itemized list of calls. So what do I do? Go by years previous bills for my allocation? This is going to be a problem if this is the future of cell phone billing.

[oceanlovin'ea]

Percentage

I have always asked them what percentage of their cell phone usage was business related. Most give a reasonable %. I multiply that times 12 months and am done.

My question was more about a family plan bill that has 2 phones on it. The charge for the first line is always the larger amount and the second lines are very minimal. But many times the minutes used for the second phone are much higher. So if the business phone is the first line would you use that figure ($89.99 plus tax) for figuring his business percentage?

Linda F

[oceanlovin'ea]

Matt

I have always asked them what percentage of their cell phone usage was business related. Most give a reasonable %. I multiply that times 12 months and am done.

My question was more about a family plan bill that has 2 phones on it. The charge for the first line is always the larger amount and the second lines are very minimal. But many times the minutes used for the second phone are much higher. So if the business phone is the first line would you use that figure ($89.99 plus tax) for figuring his business percentage?

Linda F

[KJ Judd]

I deduct the main plan charge for my business as my cell is my only business line (and used nearly exclusively for business). My husband's phone is used minimally during the month to call his parents who are long distance and if he's gone for the weekend.

In this case I feel comfortable deducting the main first phone charge for business and not deducting the extra $15 or so for his phone. (Besides I actually had my business cell phone for several years before he came on my plan.)

[newbie]

Are you kidding? So your client has a cell phone with 70 calls per month x 12 months you make them go through 840 calls, pull out the personal ones, and remove that amount from the deduction?

Use a reasonable amount. Besides if they use a lot of minutes they will upgrade their plans to take this into account. If they are spending $200/month and you used 60% that would be $1,440 taken as a deduction. If an auditor even wanted to waste his time with it and found that it was only 52% business you are only talking disallowing $192. Not even close to being worth all of that aggravation.

Ouch, you've seem a little irritable in your last couple posts. You are very wise but you should not belittle those who may be less knowledgeable or less experienced.

A $192 disallowance would have some of my clients screaming at me and that's why it's up to the client to decide a reasonable allocation, and minutes seems the most logical. If they don't want to take the time to count minutes they can come up w/ a different allocation or take nothing, but I will not be the one to make a moot point out of the deduction.