Howell Financial & Tax Service

Howell Financial & Tax Service We are a financial services business dedicated to helping individuals and businesses with all their tax and bookkeeping needs.

11/25/2025

The Senate just passed the most significant SALT deduction changes since 2017.
While everyone's celebrating the increase from $10,000 to $40,000, there's a hidden tax trap that creates effective marginal rates exceeding 45% --
Consider a couple earning exactly $500,000 with typical itemized deductions totaling $70,000 (including the full $40,000 SALT deduction). Their taxable income would be $430,000, placing them in the 32% marginal tax bracket.

Scenario B: Income Above the Threshold
Now consider a similar couple earning $600,000 with identical deduction patterns. The phaseout mechanism reduces their SALT deduction by $30,000 (calculated as 30% × ($600,000 - $500,000) =
$30,000). This reduction drops their SALT deduction from $40,000 to $10,000, leaving them with only $40,000 in total itemized deductions. Their taxable income becomes $560,000, pushing them into the 35% bracket.
The Mathematics of the Tax Trap The couple in Scenario B earned $100,000 more in gross income than those in Scenario A, but their
taxable income increased by $130,000 ($560,000 - $430,000). This means they face federal income tax on 130% of their additional earnings, creating an effective marginal rate of 45.5% (35% × 130%) before state income taxes, which can push the combined rate well above 50%

If you earn over $500,000.00 do some tax planning now.

10/20/2022

IRS announces federal income tax brackets for 2023
The IRS today unveiled federal income tax brackets and other tax changes for the 2023 tax year.

The agency tweaks multiple tax provisions annually to account for inflation, including tax brackets. While tax rates remain the same, the income limits that apply to each rate have been adjusted.

The 2023 changes generally apply to tax returns filed in 2024, the IRS said.

Below are the new brackets for both individuals and married coupled filing a joint return:
37% for individual single taxpayers with incomes greater than $578,125 ($693,750 for married couples filing jointly)
35% for incomes over $231,250 ($462,500 for married couples filing jointly)
32% for incomes over $182,100 ($364,200 for married couples filing jointly)
24% for incomes over $95,375 ($190,750 for married couples filing jointly)
22% for incomes over $44,725 ($89,450 for married couples filing jointly)
12% for incomes over $11,000 ($22,000 for married couples filing jointly).
10% for incomes of single individuals with incomes of $11,000 or less ($22,000 for married couples filing jointly)
The IRS also announced new standard deduction amounts:

$27,700 for married couples filing jointly, up $1,800 from the prior year
$13,850 for single tax payers and married individuals filing separately, up $900
$20,800 for heads of households, up $1,400.

10/05/2022

A Guide To Tax Planning For Victims Of Hurricane Ian And Other Disasters
Alan GassmanContributor
Tax advisors are already working hard to determine how the IRS disaster relief announcements and Internal Revenue Code will impact disaster victims, and those who reside in disaster areas. While the first thoughts of many are how they are able to extend income tax returns that are due October 15th 2022 to February 15th, 2023 and whether they can deduct losses and home restoration costs. But there is much more to know and consider.

All residents of Florida, South Carolina and Georgia already qualify under many unique rules, regardless of if they were affected, but that seems fair, because tax professionals in these States will have great challenges working with incomplete records, staffing issues, financially and emotionally distraught clients, and many corporate challenges.
Section 139 Qualified Disaster Payments to Employees and Contractors Are Not Taxable to the Recipient
Employers should keep in mind that they can pay certain expenses for employees under Internal Revenue Code Section 139 as deductible expenses that the employee or independent contractor will not have to include in income, and the employer will be able to deduct, and not have to pay employment taxes, workers compensation, unemployment compensation or pension contributions moneys on.

Employers may therefore ask their tax advisors about providing qualified disaster payments in lieu of future bonuses or other forms of compensation.

09/29/2022

There is good news and bad news contained in a new report from the Treasury Inspector General for Tax Administration (TIGTA) about the IRS’s handling of advance child tax credit payments to taxpayers last year.

First, the good news: In its audit—which was initiated to assess IRS processes and procedures to ensure that child tax credit advance periodic payments were accurate and made to only those taxpayers who met qualification requirements—TIGTA found that the IRS correctly sent more than 175.6 million payments to recipients, totaling approximately $75.6 billion, between July and November 2021.

Now the bad news: TIGTA also found that 3.3 million payments, totaling more than $1.1 billion, were sent to 1.5 million taxpayers who should not have received the money. In addition, the IRS did not send 8.3 million payments, totaling about $3.7 billion, to 4.1 million eligible taxpayers.

08/29/2022

Fiscal Year 2022 Statutory Review of
Restrictions on Directly Contacting Represented Taxpayers
The IRS has a number of policies and procedures to help ensure
that taxpayers are afforded the right to designate an authorized
representative to act on their behalf in a variety of tax matters. In
addition, the IRS has a process to handle the review and disposition
of taxpayer allegations of direct contact violations.
TIGTA selected a statistically valid stratified sample of 105 taxpayers
from a population of 1,365 taxpayers who had collection actions
documented in case history narratives by Field Collection
employees between October 1, 2020, and September 30, 2021.
TIGTA reviewed the case history narratives for these sampled taxpayers and found no instances in which the Field Collection employee violated a taxpayer’s rights under I.R.C. § 7521 and fair tax collection practices of I.R.C. § 6304(a)(2).
While the majority of Field Collection employees appeared to be
familiar with the direct contact provisions and fair tax collection
practices, not all revenue officers are familiar with the requirements
of the provisions.
TIGTA interviewed a judgmental sample of 20 revenue officers out
of the 2,505 Field Collection employees as of September 30, 2021.
When presented a hypothetical situation involving a revenue officer’s response to a taxpayer asking to speak to a certified public
accountant for an opinion on the issue at hand, four of the
20 revenue officers did not state that they would suspend or
reschedule the interview. Sixteen of the 20 who would end the
interview would allow consultation times that ranged from two to
30 calendar days. The revenue officer is to allow a minimum of
10 business days for the consultation with an authorized
representative after a suspended interview.
When presented hypothetical situations involving taxpayers
requesting or already having a power of attorney, the majority of
revenue officers would require the appropriate form to designate
a power of attorney but do not know to request an updated form
when all open tax periods are not covered

08/24/2022

Which Vehicles Qualify for New $7,500 Electric Vehicle Tax Credit?
The Inflation Reduction Act only offers tax credits on electric vehicles assembled in North America.
By Erik Bascome, Staten Island Advance, N.Y. (TNS)

Those looking to purchase an electric vehicle could be eligible for a $7,500 tax credit from the federal government, but because of language in the recently signed Inflation Reduction Act, only certain vehicles qualify.

The new law hopes to encourage electric vehicle production in the United States, and in an effort to do so, only offers tax credits on electric vehicles assembled in North America.

The Department of Energy’s Alternative Fuels Data Center has released the full list of electric vehicles that currently qualify for the credit.

However, some manufacturers have already reached the 200,000 vehicle-cap for this year’s credit, meaning those vehicles won’t qualify for the tax credit again until Jan. 1, 2023.

Additionally, starting next year, the credit will only be available to individuals earning less than $150,000 per year, or married couples earning less than $300,000, and will only be offered on electric cars costing less than $55,000 and electric trucks and SUVs costing less than $80,000.

So how many EV Cars will be listed for $54,995.95 and EV SUV be listed for $79,995.95 that where listed for less.

08/15/2022

Congress enacts tax and climate bill
The U.S. House of Representatives on Friday approved the Inflation Reduction Act, H.R. 5376, reflecting the Senate's substitution of the original bill with a package of tax credits encouraging conservation and cleaner sources of energy, increased IRS funding, and a number of tax provisions.

The bill, which in its larger, original version was known as Build Back Better, now heads to President Joe Biden, who has indicated he will sign it into law.
The IRS funding provisions included in the bill would raise an estimated $124 billion in revenue, according to Senate Democrats' summary of the bill's revenue effects. A Congressional Research Service report tallies those provisions as increasing the Service's budget authority through fiscal 2031 by these functions and amounts:

Enforcement, by 69% to $111.7 billion;
Operations support, by 53% to $72.9 billion;
Taxpayer services, by 9% to $36.8 billion; and
Business systems modernization, by 153% to $7.8 billion.

So we raise IRS funding by $229.2 billion so they will collect $124 billion. Now if my math is correct we will spend 292.2 B to bring in 124 B and will be short (105.2B) Isn't that like buying an apple for $1 and selling it for .60c and wander why you are still broke.
Now if my math is correct billion

08/13/2022

IRS starting point: 4,600 guns, 5 million rounds of ammo, 'Hitman Suits'
Expectations that Democrats will ram through their latest spending package today in the House are drawing attention to the plan to give the Internal Revenue Service $80 billion to hire a massive army of 87,000 agents.
A Secrets report this week that the agency is hiring armed special agents and telling them that they should be ready to use “deadly force” against their targets has put a spotlight on IRS policing in the country, raising questions about what they do and just how armed the agents are.
Citing audits and a report from OpenTheBooks on arms spending by over 100 federal agencies, many with their own police forces, ATR said even before spending a dime of the new money, the IRS already has an arsenal of 4,600 fi****ms and five million rounds of ammo.

It’s no surprise that the IRS has an armed police force. In fact, they have a storied history of dangerous investigations, including seizing Al Capone and solving the Lindbergh kidnapping. Today the agency is deeply engaged in fraud, tax evasion, terrorist financing, and narcotics trafficking.

The details of its arms cache, and the likelihood that it will surely grow with the new spending, show how well armed it is.

From fiscal year 2015-2019, the IRS ranked 8th among “general and administrative” agencies in arms, equipment and ammo spending at $8,697,142, said the OpenTheBooks report.

08/11/2022

An Internal Revenue Service (IRS) job posting for special agents received renewed interest for its list of major duties, which include carrying a firearm and a willingness “to use deadly force.”

The interest comes following news that the Democrat ‘Inflation Reduction Act’ will increase the department’s budget by $80 billion and hire tens of thousands of IRS agents.

Armed Agents?
In addition to increased hiring at the IRS and a cringe-worthy job posting, previous reports have shown that the revenue agency has been purchasing guns and ammunition at an eye-popping rate.

Reports indicate the IRS bought nearly $700,000 in ammunition over a timespan ranging from March 1st to June 1st of this year.

The news prompted Representatives Matt Gaetz (R-FL) and Jeff Duncan (R-SC) to push the “Disarm the IRS Act,” which would prohibit the IRS from buying ammunition.

06/28/2022

New Reporting Requirements for 1099-K
June 21, 2022
Whatever the outcome, both small business merchants, new gig workers, and accountants alike should be prepared for an influx of Form 1099-K in 2023.
Mary Girsch-Bock

It used to be that receiving a Form 1099-K was relatively rare. The form, technically known as Form 1099-K Payment Card and Third-Party Network Transactions was used to report payments received from various third-party resources. Prior to 2022, the monetary threshold to receive a 1099-K was $20,000, with 200 sales-related transactions required. Both requirements had to be fulfilled in order to receive a 1099-K.

But thanks to a bill tucked inside the American Rescue Plan Act that was passed in 2021, anyone who sells more than $600 in merchandise with any number of transactions, even a single one, will be receiving the newly revised Form 1099-K.

If you’re a small business owner and receive the majority of customer payments from credit cards, cash, or checks, you’ll likely be unaffected. But if you use third party settlement organizations to get paid, the rules have changed. In 2022, companies such as Zelle, PayPal, Square, Stripe, Venmo, and others will be sending you a 1099-K if you receive more than $600 in payments during the year. Both Uber and Lyft are also considered third-party settlement organizations or use an organization to pay their workers, so if you had a few gigs with either, you’ll be receiving a 1099-K as well.

The American Rescue Plan Act does specify that reporting requirements are limited to goods and services only, so if will not affect any funds you may receive from friends and family, so you can transfer money to your kids without them having to pay taxes on it. Unfortunately, there is no really good way to differentiate between the two at this time, which may result in transactions being erroneously reported on Form 1099-K (and to the IRS) that should not be.

The end result of this change is that individuals who have sold small amounts of merchandise on eBay, Etsy, and other selling platforms to make ends meet may suddenly find themselves on the hook for increased taxes. From an accountant’s standpoint, this means that more small business clients will be including a 1099-K with their year-end documentation. Another downside to this new reporting is that Form 1099-K does not include credits, discounts, fees, or returns in its total reported, leaving it up to the individual to expense those items separately. This also means that more individual tax filers may find themselves required to file a Schedule C to report additional income.

05/10/2022

IRS destroyed 30M paper information returns due to backlog
By Michael Cohn
May 09, 2022, 12:37 p.m. EDT
The Internal Revenue Service decided to destroy an estimated 30 million paper-filed information return documents in March 2021 because of its inability to process its backlog of paper tax returns, according to a new report.

The report, released Monday by the Treasury Inspector General for Tax Administration, noted that the IRS typically uses information return documents for post-processing compliance matches to identify taxpayers who don’t accurately report their income. The report focuses on how the IRS should be doing more to encourage electronic filing of business tax returns and reduce paper filing. TIGTA reported that, while e-filing of business tax returns has continued to increase, the e-filing rate still lags behind that of individual tax returns.
During the pandemic, millions of paper tax returns and other documents accumulated at IRS facilities and the agency has been working overtime to catch up on the backlog. Another recent TIGTA report noted that more than 16.4 million individual tax returns, transactions and Accounts Management cases remained in inventory as of the end of 2021. During a Senate oversight hearing last week, IRS Commissioner Chuck Rettig testified that the number of unprocessed tax returns from 2021, as of April 21, had been reduced to 1.8 million
“The backlogs of paper tax and information returns to be processed along with the inability to ship paper tax returns and/or retrieve paper tax returns from Federal Records Centers due to the pandemic demonstrate the need for the IRS to develop a Service-wide strategy to further increase e-filing,” said the report. “However, the IRS does not have a Service-wide strategy that identifies, prioritizes and provides a timeline for the addition of tax forms for e-filing nor an accurate and comprehensive list of tax forms not available to e-file.”

The problems led to the wholesale destruction of millions of information returns. The report does not explain exactly why the IRS destroyed millions of information returns, but it seems to be part of an effort to expedite the processing of the backlogged business tax returns.

“This audit was initiated because the IRS’s continued inability to process backlogs of paper-filed tax returns contributed to management’s decision to destroy an estimated 30 million paper-filed information return documents in March 2021,” said the report. “The IRS uses these documents to conduct post-processing compliance matches to identify taxpayers who do not accurately report their income.”
The IRS uses the documents to conduct post-processing compliance matches such as the IRS’s Automated Underreporter Program to identify taxpayers not accurately reporting their income, according to the report. IRS officials told TIGTA that once the tax year concludes, the information returns, such as Forms 1099-MISC, Miscellaneous Information, can no longer be processed due to system limitations. That's because the system used to process the information returns is taken offline for programming updates in preparation for the following filing season.

04/25/2022

Payroll Taxes Funded The Most Scandalous Frauds In 2020 And 2021
Carrie Brandon ElliottContributor
For two years in a row, the Association of Certified Fraud Examiners has placed theft of pandemic-related enhanced unemployment benefits at the top of its annual list of five most scandalous frauds. The association compiles its list based on money lost, lives affected, and relevance to the anti-fraud profession. In 2020 and 2021, fraudulent unemployment benefits claims connected to identity theft and stolen personally identifiable information (PII) met those criteria (Fraud Magazine (Jan./Feb. 2021) and (Jan./Feb. 2022)).

In response to pandemic-related shutdowns, the U.S. government enacted several stimulus measures that included enhanced unemployment benefits. Enacted March 18, 2020, the Families First Coronavirus Response Act increased flexibility for state unemployment insurance agencies and provided additional funding to respond to the COVID-19 pandemic. Enacted days later, the Coronavirus Aid, Relief, and Economic Security Act expanded states’ ability to provide unemployment insurance for workers affected by the coronavirus, including workers who aren’t ordinarily eligible for unemployment benefits, such as independent contractors.

What followed were countless fraudulent benefits claims: The Office of the Inspector General for the U.S. Department of Labor estimated about $87 billion in fraud-related payouts, although some experts think losses could be much higher than that.
Bots and low-wage workers completed high volumes of online application forms and claimed unemployment benefits in all 50 states. Bots automatically populated the forms with stolen PII, while Chinese and West African crime syndicates hired low-wage workers across the globe to input stolen data into unemployment benefits portals. One U.S. state received claims from IP addresses in nearly 170 countries.

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