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Beginning June 2009, university-provided cell phones and PDAs will be treated as taxable fringe benefits, subject to withholding for payroll taxes. This policy change results from an IRS audit requiring UCSD to comply with rules for employer-provided cell phones and PDAs.
Note: This should not result in any out-of-pocket expenses for employees. Any taxes will be offset by a stipend. See details below.
Information for employees
Tax implications: The cost of your university-provided cell phone plan, including the device, is added to your taxable earnings each month as imputed income.
You receive a monthly cash allowance to offset additional payroll taxes. This allowance appears in your pay. Because the allowance, itself, is taxable, it is increased using the IRS gross up formula.
- Example: Your $50/month plan is charged with $600 in imputed income for the calendar year. This amount is added to your Form W-2 as additional wages and subject to federal and state income taxes and applicable FICA taxes.
In this case, you would receive a cash allowance of $35.60/month ($427.20/year) as reimbursement for the withholding taxes on the imputed income and the taxes associated with the cash allowance, itself.
These procedures begin with pay dated June 30 for monthly employees and June 24 for biweekly employees.
Effects on service plans:
- You don't need to file any paperwork. Your department reports your service plan to the university, and you will see the changes automatically in your pay.
- Your current cell phone service plan is not disrupted.
- You can use your university-provided cell phone or PDA for personal calls as long as you don't exceed your plan's minutes.
FAQ: Learn more by visiting FAQ: UCSD-Provided Cell Phones and PDAs.
Information for departments
To comply with the new regulations, departments need to calculate stipends and determine DOS codes. For more information, see:
Questions? Contact: Sally Brainerd, Associate Controller, (858) 822-1814.
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