Last week, the IRS announced a proposal to start collecting taxes on employees’ personal use of work-issued cell phones. A few days later, the agency had a change of heart.

It wasn’t a new idea — the taxes are technically already required. A 1989 law classifies personal use of a business phone as a taxable benefit, meaning employees are required to track their calls, text messages, and downloads, and pay taxes on the value of anything not work-related.

But the law was passed when cell phones were bulky, calls were expensive and service was limited. So hardly any employees got phones, and those that did made few personal calls.

Once cell phones became common, the IRS stopped enforcing the law. That stance looked like it was going to change, though, when the agency unveiled a plan to collect the taxes.

To ease the administrative burden of tracking every call, the IRS came up with three other options:

1. Consider 75% of phone use to be work-related, and the other 25% to be personal, across the board. All employees would pay tax on the 25%, regardless of how they used the phone.
2. Let employees prove they have a personal cell phone they can use during work hours. Then they wouldn’t be taxed at all for the work-issued phone.
3. Have employers take a statistical sampling to determine employees’ average personal use.

The IRS announced it would take public comments on the proposals until Sept. 4. But it looks like they got enough already.

Even with the three options, the proposal generated an outcry of protest from IT and accounting staffers worried about dealing with call records; HR and benefits pros concerned about one of their perks diminishing in value; and anyone with a work-issued cell phone who doesn’t want to pay more taxes.

In response, the agency reversed its position. In a statement released last week, IRS chairman Doug Shulman asked Congress to make it clear there will be no tax consequence for employees who use work-related devices for personal reasons.

He said the purpose of the proposal was not to “crack down” on collecting the taxes, but rather to simplify the rules. However, Shulman said in the statement, “the passage of time, advances in technology, and the nature of communication in the modern workplace have rendered this law obsolete,” and keeping it on the books will “inevitably leave widespread confusion among employees and businesses.”

Bills that would repeal the old law have been introduced into both houses of Congress this year. We’ll keep you posted.

Computerworld writer Mike Elgan recently summarized the alleged threats. Here’s his list of the ways your cell phone is might be trying to cause you serious physical trauma:

• Cancer — This one’s been tossed around for a while but got a second wind recently when the director of the University of Pittsburgh Cancer Institute sent a memo asking employees to limit cell phone use because of the possible cancer risk.
• Traffic accidents — Even though many people would agree that using a phone while driving raises the risks, there are plenty of cases of accidents involving drivers talking — or even texting — while behind the wheel.
• Child development problems — A survey by the Danish National Birth Cohort claims exposure to cell phone signals (before and after birth) raises the likelihood a child will suffer from hyperactivity and other behavioral and social problems.
• Lightning strikes — Russian officials say cell phones are to blame for an increase in deaths caused by lightning. (The theory is that a cell phone in use will attract the bolt.)

Does any of this mean cell phone users (i.e., most likely you and all of your employees) are at risk and should stop?

It depends on who you ask. You can read Elgan’s take here.

The main problem: All of the claims are anecdotal — there aren’t any real numbers to back them up.

We’ve written before about how the presence of pornography in the workplace can be enough for an employee to sue for sexual harassment. Well, now there’s something employees ought to look out for besides people’s Web browsing: cellular porn.

That’s right, it’s pornography delivered straight to a person’s cell phone. And it can cause all the same problems as other offensive material if it’s being viewed or passed around at work.

Obviously, employers have no way of blocking this content or tracking how employees use their own phones. But if anyone is made aware of this behavior, through complaints or observation, it’s important to take action.

Otherwise, it might turn into a visit to court.

Everyone knows working in a noisy environment is tough. But a new study shows exactly how bad it can be. Here’s what the researchers did:

A bunch of administrative professionals were asked to perform typical office work for three hours. Half were by themselves in a private room, and the other half had to listen to a recording of typical “office sounds.”

Afterwards, the group was given a set of puzzles, some of them unsolvable (which the test subjects didn’t know).

The result: The group that spent three hours in peace and quiet was far more persistent, giving the puzzles two thirds as many tries as the other group before giving up.

In other words, the office noise zapped the subjects’ desire to work. A stretch? Maybe. But results like this might get managers to pay more attention to complaints about noisy cubicle neighbors.

Sexually harassing their subordinates through text messages.

That’s the problem a recruiting firm in Ireland is dealing with. An employee of the company received a sexually explicit text message from her boss at two o’clock one morning. He denies sending it, claiming a friend used his phone that night without telling him.

The company must’ve bought his story, because he was never disciplined. But a judge didn’t believe him, and made the company pay the woman the equivalent of about $50,000.

New tools, same rules

What’s the lesson for HR? Though the methods of harassment have changed, the ways of dealing with it have stayed pretty much the same. The court (like one in America likely would have) mentioned that a better investigation and a more effective complaint procedure would have kept the company out of trouble.

Now the debate’s been revived with wild speculation about a link between Senator Edward Kennedy’s cancer and his use of a mobile phone.

How many employees in your organization spend a big chunk of their days with cell phones smacked up against their ears? The answer’s likely “Plenty.”

Many researchers say there’s no evidence that proves the link. But an Australian neurosurgeon recently made headlines after conducting a review of data on the topic.

The low-level radiation emitted by mobile phones is thought to be the possible cause of cancerous tumors by some researchers.

The Australian doc says these kinds of tumors are slow to develop and cell phones haven’t been in use long enough to disprove the connection.

Though the link isn’t crystal clear, if your company issues mobile phones or mandates their use for some workers, you may want to think about taking some precautions now that will prevent future tragedy and the lawsuits that can often follow.

One suggestion from health pros: Use wired earphones with small microphones attached. This keeps the phone away from the head. (Note: Bluetooth sets won’t help. They emit the same kind of radiation as phones.)