ACC 6300 Tax Return Complications

Tax Return Complications : 

Tax Return Complications Kristi Hairell

About Bill Adams : 

About Bill Adams Became senior tax manager for Hay & Hay accounting firm six months before the dilemma he was faced with on Friday March 15th. His client was Zentor, Inc. which was a very important client for the firm both in prestige and fees

Zentor, Inc. : 

Zentor, Inc. Chief Executive Officer is Dan who Bill had built a good work relationship with Dan recommended Bill to his brother Dr. Rim, in return Bill offered to prepare a tax return for Dr. Rim

Dr. Rim’s Tax Return : 

Dr. Rim’s Tax Return After Bill looked over the Tax Return prepared by a junior tax person, he noticed something wrong with it right away. Even though Dr. Rim’s gross billings totaled $480,000 the net income for income tax purposes was only $27,000 which looked much too low to Bill. Many items were deducted that Bill thought were for personal use instead of business use.

Problems Found in the Tax Return : 

Problems Found in the Tax Return $15,000 meals and entertainment Dry cleaning bills for shirts, suits, dresses, sweaters, etc. Wages of $100 per week paid to Dr. Rim’s son

Confronting Dr. Rim : 

Confronting Dr. Rim Bill called Dr. Rim to ask him the questions he had in reference to the deductions that were taken and soon found out that Dr. Rim not only knew the deductions were not related to the business, but that he thought they were justified. Bill was then caught between a rock and a hard place. Dr. Rim had mentioned that he would let his brother, Dan, know about their conversation and Bill was now worried that Zentor, Inc. would find another accounting firm.

Ethical Issues : 

Ethical Issues Bill knew that the deductions Dr. Rim was trying to claim were not legit and should not be counted on the tax return He also knew that Dr. Rim would tell Dan that he had a problem with Bill and this could cause a problem between Zentor, Inc. and Hay & Hay Accounting Firm Lastly, a deadline was missed by the firm for Zentor that would cost them $1,200,000 in taxes – Bill’s associate had a plan to avoid this even though it was not ethical

Ethical Issues (cont.) : 

Ethical Issues (cont.) Bill had to decide what to do over the weekend for all the problems he was faced with. When leaving on March 15th he knew that his weekend would be full of thinking on how to fix the mess he was in.

What I would do… : 

What I would do… I would not file the tax return for Dr. Rim even if it did have a note that said I only went by the numbers that were provided to me, what he is doing is wrong and is not related to the medical business at all I would not worry about losing the Zentor, Inc. account, if my boss understood the situation, he should understand I was not going to do something unethical just to keep a client – also, if Dan was happy with my work so far, his brother’s opinion should not effect what he thought of my work for his company

What I would do… (cont.) : 

What I would do… (cont.) For the last situation, I do not know what I would do. On one hand I want to make sure my client does not have to pay the extra $1,200,000 in taxes for my firm’s mistake but then again, faking a date on a document is not something I would take pride in.

Thank you! : 

Thank you!