1.Read “Ethical Issue 10-1” on page 526. Write a 500-750 word report answering the following questions:
- When a business abuses this issue, how is the independent contractor hurt?
- If a business takes an aggressive position-that is-interprets the law in a very slanted way- is there an ethical issue involved? Who is hurt?. ( below is the ethical issue 10-1 on page 526.
Many small businesses have to squeeze down costs any way they can to survive. One way many businesses do this is by hiring workers as “ independent contractors” rather than as regular employees. Unlike rules for regular employees, a business does not have to pay Social Security (FICA) taxes and unemployment insurance payment for independent contractors. Similarly, they don not have to withhold federal income taxes or the employee’s share of FICA taxes. The IRS has a “29 factor test” that determines whether a worker should be considered an employee or a contractor, but many businesses ignore those rules or interpret them loosely in their favor. When workers are treated as independent contractors, they don not get a W-2 form at tax time ( they get a 1099 instead), they don not have any income taxes withheld, and they find themselves subject to “self-employment” taxes, by which they bear the brunt of both the employee and the employer’s share of FICA taxes.
2. Read “Ethical Issue 11-1” on page 563. Write a 250-500 word report answering the following question:
- The board members call you, their trusted CPA, to advise them on how Raffie’s Kids should report the mortgage on its balance sheet. Provide your recommendation and discuss the reason for your recommendation. ( below is the ethical issue 11-1 on page 563.)
Raffie’s Kids, a non-profit organization that provides aid to victims of domestic violence, low- income families, and special-needs children has a 30-year, 5 % mortgage on the existing building. The mortgage requires monthly payments of $3,000. Raffie’s bookkeeper is preparing financial statements for the board and in doing so, lists the mortgage balance of $287,000 financial statements for the board and in doing so, lists the mortgage balance of $287,000 undercurrent liabilities because the board hopes to be able to pay the mortgage off in full next year. $20,000 of the mortgage principal will be paid next year if Raffie’s pays according to the mortgage agreement.