1.
Ethical Issue
Case Summary: Many companies hire independent contractors in place of hiring regular employees to cut down costs. The main advantages for the companies are they do not have to pay social security tax or
To Identify: The way an independent contractor is hurt when business abuses this issue.
2.
To Identify: The ethical issue if a business takes an aggressive position in taking the law in slanted way and the party who is being hurt as such.
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Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
- A landlord who receives prepaid rent is required to report that amount as gross income when the payment is received. Why would Congress choose to do this? What problem does this create for the taxpayer? C O A. Congress taxes prepaid rental income due to the concern that taxpayers who spend the money will be unable to pay the tax when t comes due. The problem created for taxpayers is that they are taxed before they incur related expenses, such as repairs, insurance, and depreciation. Therefore, there is a mismatching of revenue and expense. O B. O C. Congress taxes prepaid rental income to collect more taxes from a taxpayer by increasing their tax bracket with the additional income. The problem this causes for the taxpayer is inconsistent taxable income from year to year and increases the risk of an audit. O D. Congress taxes prepaid rental income due to numerous landlords not reporting this income in the following tax year. The problem created for taxpayers is that they are taxed…arrow_forwardSparrow Corporation would like you to review its employee fringe benefits program with regard to the tax consequences of the plan for the company's president (Polly), who is also the majority shareholder. For the following items, indicate what amount, if any, is included in Polly's gross income. If an amount is zero, enter "0". a. The company has a qualified retirement plan. The company pays the cost of employees attending a retirement planning seminar. The employee must be within 10 years of retirement, and the cost of the seminar is $1,500 per attendee. $fill in the blank 1 b. The company owns a parking garage that is used by customers, employees, and the general public, but primarily by the employees. Only the general public is required to pay for parking. The charge to the general public for Polly's parking for the year would have been $3,600 (a $300 monthly rate). $fill in the blank 2 c. All employees are allowed to use the company's fixed charge long-distance telephone…arrow_forwardWhich is not correct? a) The fringe benefit tax by nature is a final tax. b) The personal expenses of a managerial employee shouldered by the employer are subject to fringe benefit tax. c) Employees do not need to file income tax returns to report the fringe benefit. d) The monetary value of the fringe benefit is multiplied by the fringe benefit tax rate.arrow_forward
- Serena operates a gift shop. To reduce costs of credit card transactions, she offers customers a discount if they pay in cash. For the holiday rush, she hires some short-term workers but pays them cash and does not add them to the payroll. a. What are some of the tax problems Serena might have? b. Assess Serenas chances of audit by the IRS.arrow_forwardTrue or False: You are employed. The Income tax on your salary is required to be paid at the Mayor’s Office.arrow_forwardAkerley Spa is a beauty salon that provides hair and nail services. Hair services and nail services are provided by two separate profit centres. Michelle Akerley is a sole proprietorship, thus the company is not responsible for paying income taxes. Michelle Mignon, the owner of the salon, does all of the administrative work and does not deduct payroll for herself. Payroll expenses are paid only to the employees that Michelle hires to work in the hair and nails departments. Michelle Akerley incurred the following revenue and expenses for the year ending December 31, 2016. Cost of sales Hair supplies Nail supplies $10,000 $7,000 Other Expenses Administrative $2,000 Phone and internet Advertising $1,200 $500 Repair and maintenance $600 Utilities $1,000 Payroll-hair employees Payroll-nail employees $25,000 $15,000 Rent $2,000 Property taxes $2,000 Insurance $3,000 Interest $800 Depreciation $2,000 Revenue Hair revenue Nail revenue $50,000 $30,000 Using MS Excel arrange the above financial…arrow_forward
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- true or false In most situations, the total Social Security taxes levied on employers will exceed the amount of Social Security taxes withheld from employees.arrow_forward. If a fringe benefit involves a deduction from employee pay, which of the following is true? A. Employers may only offer the benefit to certain classes of employees. B. The employee must enroll in direct deposit for their pay. C. The fringe benefit must be subject to income tax. D. The amount of the deduction must be listed on the employee's pay advice. 2. The ________ determines when benefit amounts should be withheld from employee pay. A. employee B. employer C. IRS D. State in which the business is conductedarrow_forwardThe IRS spends considerable time and effort trying to distinguish whether a person is an employee or an independent contractor. Why? What standards does the IRS use to determine whether a person is an employee or independent contractor? If self-employment tax and social security tax/medicare tax are equal in amounts, why does the IRS care whether a person is an employee or independent contractor? Please answer all questions.arrow_forward
- Business Its Legal Ethical & Global EnvironmentAccountingISBN:9781305224414Author:JENNINGSPublisher:Cengage