Help for a thorny employee payment/reimbursement issue regarding cell phones may be closer than you thought.

Under current IRS regs, if you pay for any employees’ cell phones, your company should require the workers to document whether each phone call was for business or personal use. If you don’t have that documentation, the value of the use of the phone is technically income to the employee, and should be taxed accordingly.

A “business use only” policy isn’t enough — IRS knows it’s far too easy for employees to get around it.

But substantiating business use of a cell phone is a huge burden for companies and their workers — which is why many don’t do it (and also don’t bother to include the value as income.)

Fortunately, IRS has gotten the message that the rules haven’t kept up with the importance of cell phones to day-to-day business.

Right now, a bill is in progress through the Senate that would remove the requirement that you substantiate cell phone use. (The bill has already passed the House.) Several key senators support the bill, and they’re getting support from a variety of companies and business associations. A recent letter, signed by organizations ranging from the American Institute of Certified Public Accountants to the United States Chamber of Commerce, pointed out that the law was first put in place when cell phones were a near-luxury.

These days, they’re ubiquitous. And the cost of complying with the law is far greater than the fringe benefit to employees.

With any luck, the bill will pass the Senate soon — especially in an election year when politicians are looking for ways to benefit the voters.

We’ll keep you posted on the bill’s progress. But in the meantime, let us know how you handle cell phone reimbursements by leaving a comment.

The definitive answer: Kind of.

A new survey by the Society of Human Resource Management shows that 42% of companies say they’re reimbursing at the new cap — and another 3% are planning to get there.

That’s the most common strategy by far, but it also means that more than half of your peers aren’t at the full cap — and don’t plan to be.

Chances are however, that those companies that don’t raise to the full mileage rate, will be raising their reimbursement rates to at least keep within shouting distance of IRS’ rate.

What was your company’s response to the mid-year mileage rate hike? And how did employees respond? Let us know in the comments.  

It’s a mixed bag for Accounting: On one hand, it should reduce the amount of griping you hear from employees who use their cars for business travel. On the other hand, it’ll require extra work on your part to get everyone up to speed.

If your company is matching the increase, be prepared to move quickly to get the word out to everyone who needs to know it. Because there’s so little time to prepare for the change, there’s likely to be some confusion.

Send a short, clearly worded memo to business travelers, managers who approve expense reports and any other affected co-workers. Better yet: Send one via email, and one on paper to increase the chances that at least one of them gets noticed.

As a further reminder, update any electronic expense report forms you have. If that’s not an option, place an “update” notice in an area that most travelers will see. That might mean the break room, A/P’s in-bin or any other highly trafficked spot.

Congress to change the rate again?
While IRS’ change is good through the end of the year there’s another potential change on the horizon. Currently, there are bills in the House and Senate that would raise the mileage rate to 70 cents – and make the change retroactive to Jan. 1, 2008.

It may take some time for the bills to make their way through Congress, but in an election year – with voters feeling the economic pinch of rising gas prices – it’s a safe bet that some version of the law will be passed.

Other rates to note
The rates for moving and medical mileage are also increasing to 27 cents per mile. (Use the moving rate if you reimburse an employee for a job-related move.) The charitable rate, set by Congress, is still 14 cents.