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      3-5-08  

 

 

 

 

 

IRS REGULATIONS DRIVING EFFORT
Employee cell phone policy being studied

by Kathy Crawford
Landmark reporter

Donna Resz, financial director of Riverside, plopped a fat binder down on the podium to make a point at Tuesday night’s board of aldermen meeting.

The binder, which was several inches thick, held five months worth of city employees' cell phone bills. The recordkeeping is necessary under IRS regulations.

“Chief Mills and I have come up with a cell phone policy that we've implemented and wanted to let you know about this policy and why we're implementing it,” she told the board.

Resz said that the driving force behind the new policy was IRS regulations. She said that in the past few years the IRS has been auditing local governments to ensure they are in compliance and fully reporting all income.

“Several governments have been fined for non-compliance,” she said. “So, this (new) policy would get us in alignment with the IRS.”

The city currently supplies a cell phone to any employee who is on call 24/7 and to those who the department head deems it necessary to accomplish their job. The vast majority of the phones are in public safety, Resz said.

To satisfy the IRS, copies of all cell phone bills are distributed to the employees, who then go through the bill and mark what was personal.

“I just want to bring up to you that this is what you're paying your chief of police, your captain and your city administrator to do,” Resz said.

Then the finance department assigns a value to the personal use based on percentage and inputs the data on a spreadsheet, requiring more time. The value of the personal calls needs to be added to the employee's wages and they will be taxed for it, she said. The IRS also requires proof that the finance department is conducting audits, which the finance department does randomly, to ensure that the employee's are being honest.

Resz told the board that if the IRS should audit the city and these steps were not taken, the IRS would conclude that all of the phone calls “must be personal.” They would calculate the approximate taxes that individuals would have paid on their personal usage and fine Riverside, plus add penalties and interest. She said that the IRS has fined some municipalities as much as $40,000 to $50,000 for noncompliance.

“The new policy clearly defines the responsibility of the department head, employee and finance department in the role of making sure the city's resources are used as wisely as possible,” Resz said.

Resz told the board that there is also an alternative procedure.

“It won't cost us any additional money, and it will reduce a lot of paperwork,” she said.

The alternative policy would have the employee buy their own cell phone and the city reimburse them. The reimbursement would show up on the employee's W-2 as taxable income. If the cell phone breaks, it would be the employee's responsibility to repair it. Resz said the employees would have to select a plan that is acceptable to the city and that will interact with its resources.
Mayor Kathy Rose said she already has a cell phone for business and another one for personal use.

“I guess the reason I think a lot of employees are not anxious to do this is because we get a discount on our bill because we're a government entity,” she said. “However, we wanted to offer it as an option because it really would save a lot of time and a lot of paperwork both in finance and with the employee.”

Fire Marshall Gordon Fowlston said that he thinks new policy to reduce paperwork and time is necessary for the city.

 
 
 

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