Reference no: EM131313553

DESCRIPTION BUSINESS

Scenario

Wanda is reviewing her tax returns from the previous year and is shocked at how much tax she paid the government. She had good income, but had to pay a large amount of self-employment taxes on top of her normal federal and state tax liabilities. She slumps back onto the sofa and tells Cosmo, "You know Cosmo, some days I feel like I work for nothing. The government gets to keep more of my money than I do." He just wags his tail, thinking she is talking about how handsome he is.

Wanda can't get her tax bill off her mind and decides that she is going to handle this the way that the "rich people do" and start keeping two sets of books-one for her and one for the tax man. After all, as a sole proprietor no one really has to know how much she really takes in from selling dog treats. She starts to plan how she is going to make this work, but as her plan comes together, she feels increasingly uncomfortable about this decision.

For Discussion

1. What are the legal and ethical consequences of Wanda keeping two sets of financial records and failing to report all of the income from Salty Pawz?

2. Even though Wanda is a sole proprietor, who else could be harmed by her actions?

3. Are there long-term problems she could be creating for herself that she doesn't see at this point? If so, what are they?