ACCT341, Test 1, Part II, Ch. 1-8, 15
NOTE: Part II is a take-home test due at midnight on Wednesday (Feb. 10). Email your answers to
acct341@wallawalla.edu. No class/lab will be held on Wednesday. Complete each question below. A digital
copy of this test is available on the K:class/ drive as well as a link available on the course webpage).
A.
1. Suppose that you run a small business and have recently hired someone part-time to help with the work.
Discuss the major factors a business should consider in classifying a worker as an employee or independent
contractor. (See IRS Publication 15-A at https://www.irs.gov/publications/p15a/ and the US DOL’s recent
interpretation at http://www.dol.gov/whd/workers/misclassification/ai-2015_1.htm). Don’t simply list the
factors, but explain them in your own words and give examples. You will need at least a half-page of
discussion if you hope to get full points on this question.
2. Why would an “employer” want to classify workers as independent contractors? Be very specific (e.g.
don’t just list broad categories but itemize your answer carefully).
3. Read the story below about the Fedex drivers dispute and answer the following questions: (a) What is the
dispute about? (b) What are the arguments on both sides of the dispute? (c) Who do you side with and why?
4. What form does a business send to independent contractors that shows how much they were paid for their
work?
5. What are the purposes of this form? Discuss at least two.
6. Not all independent contractors should receive this form. To which independent contractors should this
form be sent? (Be very specific.)
7. By what date does this form need to be mailed (postdated) to independent contractors in 2016?
8. Which form(s) related to independent contractors must be sent to the IRS and by what date in 2016,
assuming you are snail-mailing the form(s)?
B.
Your friend, Luella (a social worker), seeks your help in creating a database in Microsoft Access of the contact
information for all the low-income people in her district, which includes College Place, Walla Walla, and
Touchet. She wants to record the names, mailing and physical addresses, land line and cell phone numbers,
and email addresses. You point out to Luella that ensuring the accuracy of data input into the database is
essential because experts estimate that it costs ten times as much on average to fix errors than it would to have
just entered the correct information in the first place. In bullet form, list as many specific ways as you can
think of to validate the data entered into Luella’s Microsoft Access database.
C.
Use Microsoft Access to answer each question below. The data table for this problem appears at the end of this
document. An Access file can be downloaded from the course webpage and is also available on the WWU
common drive K:/class/acct/341/. The file is named Test1-PartII-C.mdb. Alternatively, you could type the
data into a new Access table yourself. Answers should be emailed in PDF format (use PDF Creator). Do not
email the Access data file.
1. Sort all employees by department and then by last name. Print out the list with all fields included.
2. List all fields for each employee with the first name of Brenda. Print out this list.
3. List all fields for each employee with a pay rate over $9.50. Print out this list.
4. List all fields for each employee eligible for overtime pay (overtime = yes). Print out this list.
5. Use Access to calculate the average pay rate for all employees. Print out this query that shows the average
pay rate.
6. Create and print a report in good form for the manager of Dept. #5 that shows all of his employee names,
pay rates, and SSNs (exclusive to Dept. #5). All info should fit on one page. Include the following page
header:
Dear Manager,
As requested, we have prepared a report below for the employees that you supervise showing their Social
Security Numbers and their latest pay rates. If you would like to recommend pay rate increases, please
complete Form WR available from the Human Resource Office. Thank you.
D.
Your uncle operates a small service business with two employees and has come to you (a trained business
student) seeking advice about whether he should go with latest edition of QuickBooks Pro (to be installed on
his computer from a CD-ROM) or QuickBooks Online, a web-based software that is rented and hosted online.
In response, you are to create a comprehensive bulleted list of the advantages and disadvantages of using
QuickBooks Online, a hosted solution. This list should include all aspects, including installation, hardware,
software, cost, time, access, security, ease of use, psychological factors, etc. [Synonyms for “hosted solution”
include web-hosted software, hosted software, on-demand software, software for service, rented software,
software on the cloud, and Application Service Provider (ASP).]
E.
Flowchart Problem.
Since it is that time of the season, Archibald Andrews is thinking about his federal income tax return. Even
though his return is fairly simple (Form 1040-EZ), he doesn’t care to learn about taxes and is willing to pay
Bryce Tows, CPA, to prepare the return for him. In January, Archie received the following forms:
 Two copies of Form W-2 from his employer (Copies A and B)
 Archie was paid $700 to create a website for a local small business and he received one Form 1099Misc from the business showing non-employee compensation of $700. No income tax was
withheld.
 From the bank, Archie received one Form 1099-Int for $11.00 of interest earned.
Is it now April 14. Archie collects all of the forms listed above and gives them to the tax preparer. Because
Archie thinks he’ll end up owing tax, he sees no need to electronically file and requests that his return not be efiled. The tax preparer completes Form 1040-EZ, prints it out, and signs it. Then the preparer makes two
copies, one for his file and an extra copy for Archie’s file. Also, the preparer creates an invoice for $100.
Finally, the preparer gives Archie the original Form 1040-EZ, Archie’s copy of the return, and an invoice. He
also gives back to Archie all the information forms (two W-2s, one 1099-Misc, and one 1099-Int).
After signing the original Form 1040-EZ, Archie attaches Copy B of Form W-2 to the return. Then he writes a
check for $250 to U.S. Treasury and paperclips it to the return. He then puts all of this in an envelope and
mails it to the IRS in Fresno, CA. Archie files the rest of the paperwork (his copy of 1040-EZ, Copy A of W2, 1099-Misc, 1099-Int, and the Tows invoice). Finally, Archie writes a check to Bryce Tows, CPA for $100,
who receives the check.
Instructions:
Complete a document flowchart in good form using MS Visio or PowerPoint. Make sure that each document
symbol is separately identified. Divide your flowchart into two columns: Tax Payer (Archie) and Tax
Preparer (Bryce Tows, CPA). Use proper document flowchart symbols. Ensure the flowchart fits on one page.
Email a PDF of your flowchart to the course email address.
Database for Problem C.
LastName
ADCOX
KOZAR
MCLEAN
CUNNINGHAM
DANIELS
MCGUIRE
REEDER
BLOOM
DAVIS
DUFFY
HARPER
LOGAN
WALSH
CHAPIN
FINN
HALPIN
LAURIN
MIAGLIO
TURNER
ZURRIK
FirstName
NORMAN
LINDA
KAY
TOM
PATRICIA
ANNE
BRENDA
BRENDA
DENISE
LESLIE
LINDA
MEREDITH
KAREN
GEORGE
JOHN
MARSHALL
PHILIP
PEGGY
BRENDA
MARIANNE
SSN
901795336
412935350
405751308
919782417
517351609
201891647
619294493
513321592
517351608
314532409
615824130
704563903
216253428
203767263
715386721
913541871
514484631
414224972
713589164
504455828
Dept
1
1
1
3
3
3
3
4
4
4
4
4
4
5
5
5
5
5
5
5
PayRate Overtime
9.50
Yes
9.50
Yes
10.25
No
10.50
Yes
8.50
Yes
8.50
Yes
8.50
Yes
9.25
Yes
8.50
Yes
11.00
No
8.75
Yes
9.50
Yes
11.25
No
10.50
Yes
9.25
Yes
9.50
Yes
9.50
Yes
9.25
Yes
11.50
No
9.50
Yes
FedEx: They're Employees. No, They're Not
The feud over FedEx's "contractors" hints at battles to come
involving the classification of workers
By Michael Orey, BusinessWeek,
Get ready for an intense new round in the long-running fight over which workers are independent contractors.
Hard economic times have prompted some employers to classify more members of their labor forces as contractors. That way the
companies don't have to dole out benefits or pay taxes on workers' wages. Workers, of course, often want those benefits, and
financially strapped government bodies are desperate for the tax revenue.
For years, shipping giant FedEx (FDX) has been at the center of this fracas because it treats 12,000 package deliverers in its
FedEx Ground Div. as contractors. The company's current situation illustrates how murky the legal waters on this issue can get.
The attorneys general of New York, New Jersey, and Montana threatened to sue FedEx if it doesn't reclassify the 12,000 delivery
people as full-time employees. The states say they are owed millions in payroll taxes and that FedEx workers deserve fringe
benefits befitting full-time employees.
But the IRS announced that it was reversing a $319 million tax assessment against FedEx that had been based on the allegation
that the company misclassified drivers as contractors. The IRS won't explain its action—and FedEx won't comment—but for
federal tax purposes the drivers now appear to be independent contractors after all.
Making matters even more complicated, even as the IRS let FedEx off the hook, the agency said it is taking a closer look at other
companies that use contractors. The IRS announced that, starting in February, it will undertake extensive audits of 6,000 yet-tobe-named companies, in part to review employee classification. Meanwhile, lawmakers in several states—including New York,
Maryland, Washington, Colorado, and Minnesota—have recently passed laws tightening rules over contract workers in an attempt
to protect individuals and keep tax money flowing to state coffers.
MORE CONTRACTORS AHEAD
The legal definition of a worker turns on how much control a company has over the person: The more control, the more likely the
individual will be considered an employee rather than a contractor. Littler Mendelson, a large law firm that represents employers,
predicts that half of all Americans who are rehired after being laid off in the current downturn will return as "contingent" workers,
such as contractors or temps.
Studies show contractors cost up to 30% less than payroll employees, mainly because they have to pay for their own benefits and
employment taxes. They also aren't covered by most workplace laws, such as those related to discrimination and medical leave.
Companies that don't rely heavily on contractors criticize the practice. United Parcel Service (UPS), where drivers are unionized
employees, complains that FedEx's policy is, in the words of spokesman Malcolm Berkley, "unfair to taxpayers, competitors, and
the workers themselves."
Counters FedEx spokesman Maury Lane: "If the model weren't so successful, they wouldn't be so virulent to try to stop it." As for
the comparisons of how much contractors cost vs. employees, FedEx Ground spokesman Perry Colosimo says the figures are
"purely speculative, as we have no plans to classify FedEx Ground contractors as employees."
FedEx inherited its independent workforce in 1998, when it acquired the trucking company once known as Roadway Package
System. Most of the company's 275,000-plus workers are employees.
FedEx describes its delivery contractors as thriving entrepreneurs. The company points to Ray M. Skiptunis, with nine routes in
New Jersey, as an example. Skiptunis, who employs 15 people, says he feels every bit the independent businessman: "I'm at risk
financially. I have $300,000 to $400,000 worth of equipment, and if something bad happens, I take a hit."
But critics claim most FedEx Ground drivers are fully controlled by the company. FedEx effectively has say over everything from
uniforms to how many packages are delivered. And they face restrictions on working for rivals.
FedEx Misclassified Drivers As
Independent Contractors, Rules
Ninth Circuit
Forbes, 8/27/14
http://www.forbes.com/sites/robertwood/2014/08/27/fedex-misclassified-drivers-asindependent-contractors-rules-ninth-circuit/
FedEx is everywhere. But a key component of how it does business has been upended by
the Ninth Circuit Court of Appeals, which ruled that 2,300 FedEx Ground drivers were
misclassified. For years, FedEx called them—and paid them—as independent contractors.
No way, said the court resoundingly, they are employees.
Employees trigger a litany of federal and state tax withholding, fringe benefit, antidiscrimination, health care, pension, worker’s compensation and unemployment
insurance obligations. You avoid these entanglements by hiring independent
contractors or do you? If they are really independent contractors, sure, but labels aren’t
enough.
Disputes are common, and independent contractor vs. employee cases have factual and
legal nuances galore. So how clear is the FedEx case? “We hold that plaintiffs are
employees as a matter of law under California’s right-to-control test.” As a result, FedEx
may owe its workforce of drivers hundreds of millions of dollars.
Is this case about a little overtime? Hardly.
FedEx avoided health care, workers
compensation, paid sick leave and vacation,
retirement and more. FedEx made drivers pay
for their uniquely FedEx branded trucks,
FedEx branded uniforms, and FedEx scanners.
Plus, fuel, insurance, tires, oil changes, maintenance, even workers compensation
coverage.
Add in missed meal and rest period pay, overtime compensation, and penalties. Some
“independent contractors” even had to pay wages of employees FedEx Ground required
them to hire to cover for them if they were sick or needed a vacation, to help out during
the Christmas rush!
Alexander v. FedEx Ground, covers employees in California from 2000 through 2007.
There will be a flap about this case not only at FedEx but across the package delivery and
transportation industries. Many trucking companies use a similar “model,” calling—and
paying—their drivers as independent contractors. How about taxis, Uber, Lyft, and
others?
FedEx Ground has defended its so-called independent contractor model fervently,
vigorously and in just about every other way. The drivers are in business for themselves,
claims the delivery giant. And while other cases have chipped away at pieces of the FedEx
empire, this is a decisive one. The court’s finding that these 2,300 drivers are covered by
California’s workplace protection statutes could impact dozens of other FedEx cases
across the country.
The worker status issue can come up almost anywhere. Some employers find it surprising
that workers who sign contracts as independent contractors can still sue claiming they are
employees. Yet the tax law, labor and employment law, discrimination, pension, and
workers compensation laws are all clear that a contract doesn’t bind this issue. It’s that
important.
From drivers to salespeople, custodians to lawyers, couriers to facialists, mercenaries to
programmers, and newscarriers to scientists, there’s no one-size-fits-all solution. The IRS
cares, and so do state tax and labor agencies, workers compensation and unemployment
insurance authorities and more. All of them scrutinize the status of workers.
It even matters under Obamacare. Independent contractors aren’t covered, assuming
their status is legitimate. A central precept is that one can tell the difference between
employees and independent contractors. The IRS is active in reclassification efforts
and more scrutiny is coming. The FedEx case is a good reminder that no matter how you
label someone, the substance of the work relationship will control.