How to handle the other 50% of cell phone deduction for my small business
Title: How to handle the other 50% of cell phone deduction for my small business 1 So my family runs a small crafting business, and we're trying to figure out how to properly handle our phone expenses. I understand that if I use my phone 50% for business purposes, I can deduct that 50% as a business expense. What I'm confused about is what happens with the remaining 50% that's for personal use. Can my business still pay the entire phone bill from the business account, but only claim the business portion (50%) as a tax deduction? Or do I need to personally reimburse the business for my personal usage portion? I don't want to mess up our bookkeeping or create tax problems down the road. Anyone with experience handling this for a small business?
18 comments
Join the conversation
Peyton Clarke
14 You can definitely have your business pay for the entire cell phone bill, but you can only deduct the business portion on your tax return. The other 50% is considered a personal expense and isn't deductible. When you pay the full amount from your business account, you should record it as follows: 50% goes to your business phone expense account (deductible), and the other 50% should be recorded as an owner's draw or shareholder distribution (non-deductible). This way, your bookkeeping is clean and accurately reflects that the personal portion isn't a business expense. The IRS expects you to have some documentation showing how you determined the business use percentage, so keep track of that. It doesn't need to be complicated - just a reasonable method to show how you calculated the 50% business use.
0 coins
Peyton Clarke
•7 Thanks for the info! So if I understand correctly, I can pay the full bill from the business account, but need to categorize half of it as an owner's draw in QuickBooks? Also, what's the best way to document the 50% business usage? Do I need to go through my call logs or is there an easier way?
0 coins
Peyton Clarke
•14 Yes, that's exactly right. Pay the full bill from the business account, but in your bookkeeping software, split the transaction - 50% to telephone expense and 50% to owner's draw (or distributions, depending on your business entity). For documenting business usage, you don't need to analyze every call. A reasonable method would be to keep a log for a sample period (like a month) showing business vs. personal usage, then use that to establish your percentage. Another approach is to simply maintain a written policy stating that you use your phone approximately 50% for business. The key is having some documentation of how you arrived at your percentage if you're ever questioned about it.
0 coins
Peyton Clarke
19 After struggling with the exact same issue in my photography business, I found an amazing solution with https://taxr.ai that completely changed how I handle these mixed business/personal expenses. They analyzed my situation and showed me exactly how to document my cell phone usage to maximize legitimate deductions while staying fully compliant. What I love is that they provide detailed guidance specific to different business structures (sole prop, LLC, S-Corp), and gave me templates for tracking my business vs. personal usage. The documentation they helped me create would easily stand up to IRS scrutiny if I ever got audited.
0 coins
Peyton Clarke
•3 How exactly does this work? Do they just tell you what percentage you can deduct or do they help with the actual accounting part too? I've been guessing at my usage percentage and I'm worried I might be doing it wrong.
0 coins
Peyton Clarke
•8 I'm skeptical about these online services. Couldn't you get the same info from an accountant? What makes this better than just talking to a tax pro?
0 coins
Peyton Clarke
•19 They do both - they help you determine an appropriate percentage based on your specific situation and provide documentation templates to support that percentage. They actually helped me realize I was underdeducting at 40% when my legitimate business usage was closer to 65% based on my work patterns. What makes them different from a traditional accountant is they use AI to analyze common patterns in your specific industry and provide industry benchmarks. My accountant gave me general advice, but taxr.ai provided specific documentation methods tailored to photographers that my accountant wasn't familiar with. Plus, it was much more affordable than the hourly rate my accountant charges for consultations.
0 coins
Peyton Clarke
3 Just wanted to follow up and say I tried https://taxr.ai after seeing it mentioned here. Totally worth it! They reviewed my cell phone bills and business calendar, then created a custom usage analysis showing I could legitimately claim 60% business use instead of the 50% I was using. They also provided a documentation system that's super easy to maintain going forward. They even showed me how to properly record the personal portion in my accounting software which was exactly what I was struggling with. Definitely recommend for anyone dealing with mixed business/personal expenses!
0 coins
Peyton Clarke
12 If you're also dealing with the IRS questioning your cell phone deductions (happened to me last year), I highly recommend https://claimyr.com to get through to an actual IRS agent. I was on hold forever trying to resolve questions about my business deductions until I found them. You can see how it works here: https://youtu.be/_kiP6q8DX5c Basically, they wait on hold with the IRS for you and call you when an agent picks up. Saved me hours of waiting, and I was able to get clear guidance directly from the IRS about documenting my phone usage for business. The agent actually gave me specific record-keeping suggestions that made my documentation much stronger.
0 coins
Peyton Clarke
•22 Wait, how does this actually work? Do they somehow have a special line to the IRS or something? I've spent literally 4+ hours on hold before giving up.
0 coins
Peyton Clarke
•8 This sounds like BS honestly. If it was that easy to get through to the IRS, everyone would be doing it. How do you know this isn't just a scam to collect your personal info?
0 coins
Peyton Clarke
•12 They don't have a special line - they use an automated system that waits on hold for you. When an IRS agent finally answers, their system calls your phone and connects you directly to that agent. It's basically like having someone else wait on hold in your place. I was skeptical too before trying it. What convinced me was that they don't ask for any sensitive tax information - just your phone number to call you back when an agent is on the line. I researched them before using the service and found they've been featured in legitimate news sources. I understand the skepticism though - I felt the same way initially.
0 coins
Peyton Clarke
8 I need to eat my words and apologize. After my skeptical comment, I was still desperate to talk to the IRS about my cell phone deduction documentation, so I tried https://claimyr.com anyway. It ACTUALLY WORKED. Got a call back in about 90 minutes and was connected directly to an IRS agent who answered all my questions about documenting mixed business/personal expenses. The agent confirmed that having the business pay 100% of the bill is fine as long as I only deduct the business portion and account for the personal part as a distribution. She also gave me specific guidance on documentation that would satisfy an audit. Would have taken me days of redial attempts to get this info otherwise.
0 coins
Peyton Clarke
5 We handle this in our family business by having separate phone lines - one 100% business and one personal. Simplifies everything and no need to track percentages. Might be worth considering if you're using your phone a lot for business.
0 coins
Peyton Clarke
•16 Doesn't that end up costing more overall though? I considered doing that but couldn't justify paying for two separate plans when most carriers have unlimited everything these days anyway.
0 coins
Peyton Clarke
•5 It can be more expensive if you're looking at two completely separate plans. But many carriers offer multi-line discounts that make additional lines much cheaper than the primary line. In our case, the extra clarity for tax purposes and the ability to keep business calls separate (and turn off the business phone after hours) was worth the additional cost. Another option is a dual-SIM phone where you can have two different numbers on one device. That might give you the separation without needing two physical phones.
0 coins
Peyton Clarke
11 I'm confused about something slightly different but related. If my LLC is taxed as an S-Corp and I pay myself a salary, should I just reimburse myself for the business portion instead of having the business pay the full bill?
0 coins
Peyton Clarke
•14 For an S-Corp, you have a few options: 1. The business can pay the entire bill, but you should only deduct the business portion (say 50%). The personal portion (other 50%) needs to be treated as part of your compensation - either added to your W-2 wages as a taxable fringe benefit or handled as a shareholder distribution. 2. You can pay the bill personally and have the business reimburse you for the business portion (50%). This is often cleaner from an accounting perspective since you're only running the actual business expense through the company books. The second approach is generally recommended for S-Corps to maintain a clear separation between business and personal expenses.
0 coins