Ethics Case.14 Sandy Sally is a sole proprietor CPA who runs a successful practice with fiveemployees. Several years ago, Sally purchased an office building and relocated the practicein about 20 percent of the space and rented out the remaining portion. Things went well forthe first few months, but then two of Sally’s tenants ran into financial difficulties and had tovacate the building. Sally was unable to quickly find new tenants for the space.Sally struggled to keep current with the mortgage payments for a few months, but theloss of tenant income combined with the expense of operating a building became a largeburden. Cash flow became very tight, and Sally stopped remitting the employee payrolltaxes withheld.The IRS filed a lien for nonpayment of employee payroll taxes, which was published in alocal newspaper. A concerned citizen filed an ethics complaint.Investigation found that, although the company had been delinquent in remittingemployee payroll taxes and a federal tax lien had been filed, Sally had brought the tax liabilities into current status and produced evidence that the IRS lien had been released.Required:a. What code violation(s) have occurred in this case?b. What is the range of penalties that could be levied against Sally?c. What do you think is the appropriate penalty?
Ethics Case.14 Sandy Sally is a sole proprietor CPA who runs a successful practice with five
employees. Several years ago, Sally purchased an office building and relocated the practice
in about 20 percent of the space and rented out the remaining portion. Things went well for
the first few months, but then two of Sally’s tenants ran into financial difficulties and had to
vacate the building. Sally was unable to quickly find new tenants for the space.
Sally struggled to keep current with the mortgage payments for a few months, but the
loss of tenant income combined with the expense of operating a building became a large
burden.
taxes withheld.
The IRS filed a lien for nonpayment of employee payroll taxes, which was published in a
local newspaper. A concerned citizen filed an ethics complaint.
Investigation found that, although the company had been delinquent in remitting
employee payroll taxes and a federal tax lien had been filed, Sally had brought the tax liabilities into current status and produced evidence that the IRS lien had been released.
Required:
a. What code violation(s) have occurred in this case?
b. What is the range of penalties that could be levied against Sally?
c. What do you think is the appropriate penalty?
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