ACCT 3324: Workpaper One

ACCT 3324: Workpaper One

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Question 1

 

Overheard at one of the 30,000 Seattle area coffee shops:

 

Angry Barista: We need to simplify the tax system!
Angrier Barista: Wouldn’t it make more sense to just do a 20% flat tax?!
Angriest Barista: YES, FLAT TAX! FLAT TAX! FLAT TAX! We will all be better off!

 

Consider the following scenarios:

 

1) the current progressive tax system (hint: rates are found in I.R.C. § 1); versus

2) a 20-percent flat tax.

 

Analyze the two options above for three income levels:

 

1) $50,000;
2) $90,000; and

3) $125,000.

 

If we were only worried about the best individual outcome, what should we say: progressive or flat tax?

 

Extra point: what would your income have to be to benefit from a 20% flat tax?

 

 

Question 2

 

An email from a college friend, several years after college:

 

Hey super tax accountant friend,

 

In is August and my wife and I just redid our withholding calculation. It looks like we are going to owe $10,000 more (on top of what we already withheld!) when we file our 2020 taxes. I need to lower my tax liability, fast. Should I go for tax deductions or tax credits?

 

What should your friend do?

 

 

Question 3

 

That one friend you still have that isn’t in the accounting program:

 

Hey! Aren’t you an accountant! The IRS just sent me a letter that says I made $800k of extra income!! I didn’t make extra income, I lost money!! I knew I shouldn’t have bought and sold all of those stocks!! I don’t understand what the problem is, can you help?!?!

 

Well, can you help?

 

 

Question 4

 

During COVID-19 at a Big 4 Accounting Firm near you:

 

Angry Accountant: Can you believe that we don’t get overtime meals anymore?

Level-headed Accountant: Well, we aren’t going into the office anymore…

Angry Accountant: I don’t care! I don’t have time to cook! I want my free meal!

 

Would the Angry Accountant get her free meal if they “work from home”?

 

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