23 March 2020 Computer equipment and other tools employees used to work from home are generally not taxable when provided to teleworkers Due to public safety measures taken in response to the COVID-19 pandemic, the number of employees working from home has dramatically increased, raising questions about the tax treatment of laptops, monitors, printers and other peripherals that employers provide to employees in support of their telework arrangements. The Tax Cuts Jobs and Acts of 2017 (TCJA) removed computers and peripherals like printers, monitors, fax machines, etc. from the definition of listed property under IRC Section 280F(d)(4). (TCJA, §13302(b).) This change places computers and related equipment on the same footing as cell phone usage — in particular, the heightened substantiation requirements applicable to listed property no longer apply. Accordingly, the IRS guidance issued pursuant to cell phone usage in IRS Notice 2011-72 now applies to computer equipment provided to teleworkers. Notice 2011-72 states in relevant part that the IRS will treat the employee's use of employer-provided cell phones for reasons related to the employer's trade or business as a working condition fringe benefit, the value of which is excludable from the taxable wages subject to federal income tax, federal income tax withholding, Social Security, Medicare and federal unemployment insurance provided the cell phone usage is provided primarily for noncompensatory business reasons. For purposes of determining whether the working condition fringe benefit provision in IRC Section 132(d) applies, the substantiation requirements that the employee must satisfy for an allowable deduction under IRC Section 162 are deemed to be satisfied. Additionally, any personal use of the employer-provided cell phone will be treated as a de minimis fringe benefit, excludable from the employee's taxable wages under IRC Section 132(e). To support the presumption that the property is provided to employees for use in the trade or business of the employer, it should be clear that the property must be returned to the employer when no longer used by the employee for primarily business purposes. Further, the policy should state that allowable personal use is limited.
Document ID: 2020-0651 | |||||||||
