Electric Vehicle Tax Credits

After months and months of debate and compromise by the Senate, the Inflation Reduction Act of 2022 was passed by Congress, effective August 16, 2022. This new law is chock full of provisions, several of which could impact your income taxes. One provision that you’ve probably heard about on the news is for an Electric Vehicle Tax Credit. 

But news headlines, no matter where you get yours, don’t contain all of the information you need to take advantage of this tax credit. Spending a lot of money on an electric vehicle with the expectation of a dollar-for-dollar federal tax reduction of up to $7,500 could backfire if your purchase does not qualify.

Here are three tips to see if you qualify for an Electric Vehicle (EV) Tax Credit:

  1. Vehicles that Qualify

In general, only model year 2022 and early 2023 electric vehicles that are assembled in North America qualify for the credit. The Department of Energy published a website for consumers and auto dealers to enter the vehicle’s Vehicle Identification Number (VIN) to determine if it qualifies at https://afdc.energy.gov/laws/inflation-reduction-act

  1. Income Limitations

EV purchasers who report income on their tax return above specified levels do not qualify for the tax credit. Single taxpayers with incomes over $150,000 and married couples filing jointly that report income more than $300,000 cannot take the EV Tax Credit. The IRS will release more details about calculating qualifying income limits soon.

  1. Vehicle Price Limit

To qualify for the EV tax credit, new vehicles would need to have a suggested retail price below $55,000 for sedans. The price threshold is $88,000 for SUVs, trucks, and vans. Used vehicle models need to be at least two years old and meet a price cap of $25,000 to qualify. 

The Inflation Reduction Act of 2022 is full of provisions that could impact your income taxes, including an Electric Vehicle Tax Credit. Looking ahead, this new law also makes several more changes to the EV Tax Credit that will take effect starting in 2023. 

Want to know more about what’s new in 2022 and the future? Check out the details on the IRS website at https://www.irs.gov/credits-deductions/individuals/plug-in-electric-drive-vehicle-credit-section-30d.

Laptops for the Community

I’ve blogged a couple of times recently about building your business credibility by giving back to the community. It’s a win-win-win situation and feels great all at the same time. A perfect example came up recently, courtesy of George Mason University’s Institute of Digital Innovation, the Virginia Student Training and Refurbishment Program, and three of Mason’s amazing IT undergraduate students. Read this article for more about those amazing and inspiring IT students. https://www.gmu.edu/news/2022-08/mason-students-refurbish-donated-laptops-community-members 

As part of my volunteering with PathForward, an Arlington-based nonprofit that serves adults who are experiencing homelessness, I attended a presentation to five local nonprofits of laptop computers recently refurbished by George Mason University IT students. The students participate in the Virginia Student Training and Refurbishment Program, which teaches students to refurbish donated computer hardware and donate them to families and organizations in need. 

Talk about a win-in-win! 

Win #1 – Students participating in the program earn industry-standard professional certifications, which paves the way for both higher education and well-paying jobs. 

Win #2 – Nonprofits and families get access to technology that they wouldn’t otherwise have, or that they would have to make difficult financial choices to afford. 

Win #3 – Used computer hardware gets refurbished and reused, instead of ending up in a trash heap, creating hazardous waste, and necessitating the mining of more raw materials.

George Mason University’s Institute of Digital Innovation and the Virginia Student Training and Refurbishment Program need used laptops, desktops, keyboards, monitors, and printers to refurbish and donate to the community. If your company, government agency, or other organization has computer equipment you plan to replace or salvage, please consider donating them by contacting @Mike W. Wiczalkowski, head of the Virginia STAR program.

Building your business credibility by giving back to the community is a win-win-win situation that feels great at the same time. If participating in George Mason University’s Institute of Digital Innovation and the Virginia Student Training and Refurbishment Program seems like a good opportunity for your business, check out this link: https://www.aftrr.org/virginia-star/.

Small Businesses Targeted by Ransomware

Small businesses continue to be targeted by cyber-attacks, including ransomware. We frequently hear about it in the news media. Healthcare has been a gold mine for hackers because medical records contain such valuable information. Those of us in the tax profession get constant warnings from the IRS about cyber diligence to protect confidential tax client data, such as Social Security and bank account numbers.

It’s pretty scary for small businesses out on the web. Consider these sobering statistics from a recent research report, Cyber Confident Index 2022, conducted by Wakefield Research:

• 85 percent of companies have experienced ransomware in the past five years

• 72 percent of those who suffered attacks have paid the ransom

• 60 percent have been hit more than once

Even among industry professionals who have followed the rise of ransomware in recent years, these statistics are grave. The more damage ransomware causes, the higher the payout that attackers ensure. The average cost of attacks now exceeds $1 million. Meanwhile, the cost of cyberbreach insurance has skyrocketed 400 percent in the past two years because companies are being attacked at a higher rate, resulting in higher levels of extortions and payment.

So, what can small businesses do to guard against ransomware? Here are six tips to avoid becoming a ransomware victim:

  1. Keep software systems up to date and use a good anti-virus program.
  1. Examine the email address and URLs in all correspondence to detect a scammer mimicking a legitimate site or email address.
  1. Ignore text messages, emails, or phone calls asking you to update or verify your account information and go to the company’s website to see if something needs your attention.
  1. Never open unexpected attachments until verifying the sender’s email address and use virus scan before opening any document.
  1. Scrutinize all electronic requests for a payment or fund transfers.
  1. Be extra suspicious of any message that urges immediate action.

Don’t want to be a ransomware attack victim? It’s hard to be 100% on anything but following these six tips to avoid a ransomware attack can help protect your systems from unscrupulous hackers who want to grab valuable data from your small business.

How Long to Keep Financial Records

Do you love throwing out unneeded paperwork and other clutter, or are you a packrat? When it comes to your financial records, it’s probably best to be somewhere in between – dispose of records when you can, but not before. How long you should keep financial records depends on the action or event that the document memorializes.

For tax records, you should keep copies of your filed income tax returns permanently, including amended returns. Keep documents that support an item of income, deductible expense, or credit until the statute of limitation has expired for that tax year. The statute of limitations is the period of time within which you can amend your tax return to claim a credit or refund, or the IRS can assess additional tax, usually three (3) years. 

The IRS provides more detailed information about the statutes of limitation that apply to income tax return documents:

  1. Keep records for three (3) years after the original filing deadline, unless #4, #5, or #6, below, apply to you.
  2. Keep records for three (3) years from the date you filed your original return or two (2) years from the date you paid the tax, whichever is later, if you file an amended tax return.
  3. Keep records for seven (7) years if you file a claim for a loss from worthless securities or bad debt deduction.
  4. Keep records for six (6) years if you do not report income that you should report, and it is more than 25% of the gross income shown on your return.
  5. Keep records indefinitely if you do not file a return.
  6. Keep records indefinitely if you file a fraudulent return.
  7. Keep employment tax records for at least four (4) years after the date that the tax becomes due or is paid, whichever is later.

As usually happens with taxes, there are exceptions. For example, tax-related and other records relating to property should be kept until the statute of limitation expires for the year in which you dispose of the property. You will need these records to figure any depreciation deduction and to figure the adjusted basis and the gain or loss when you sell or otherwise dispose of the property. Records for nontaxable property exchanges should be kept for the old property that you gave up, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property.

Records no longer needed for tax purposes might be needed for another reason. Do not discard them until you check on whether you have to keep them longer for other purposes. For example, your insurance company or creditors may require you to keep some documents longer than the IRS does.

Need more details about whether you’re throwing out too much or you’re being a packrat? The IRS has them for your at https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records.

Has It Been Eight Years Already?

This past Monday was the eighth anniversary of quitting my corporate J.O.B. and starting my own business. It wasn’t an easy or quick process. I’ve learned a lot and adjusted my approach along the way based on feedback from clients and other business owners. I’ve benefitted from tenacity and serendipity and achieved my business and personal goals. Plus, I’ve had some fun along the way. The fun is probably why the time has flown by so quickly.

Anniversaries are worth celebrating, as well as the perfect time for reflection. That date on the calendar reminds us to step back to assess our progress, identify areas of potential improvement, and update our goals. Businesses that survive long enough to celebrate many anniversaries are the same ones that invest time and effort on these four activities:

  1. Plan to Meet Defined Objectives

A business plan is a road map to get where you want to go and help to keep your “Eye on The Prize.” Unless you know what you’re reaching for, you can’t grab it. Set your overall objectives and describe the detailed steps to achieve them. Set interim milestones along the way to help measure your progress and keep you motivated.

  1. Execute Your Plan

Actively work through the detailed steps in your plan. It’s exhilarating to achieve goals and move forward. Executing your plan also gives you opportunities to get more information. Use added information to adapt your plan and make course corrections. Also, listen to how your network receives your message and adjust the wording to get your message across better.

  1. Outsource Needs You Can’t (or Shouldn’t) Meet

Be realistic about aspects of your business where you do not have the necessary expertise or can’t take the time away from your core business to do yourself. Legal, accounting, and social media are some areas where engaging an expert can accomplish specialized tasks, free up your time, and prevent you from making costly mistakes.

  1. Give Back

Answering general questions in your area of expertise and presenting at workshops are ways that you can share knowledge with your network and establish your credibility. Sharing tips and perspective helps to create your brand and draw people to you and your business. Being generous is often its own reward, over the long run.

The last eight years of having my own business have been hard work, fun, and rewarding – all at the same time. It takes a lot more than investing in the four activities described above to be successful. But businesses that invest in planning, executing, outsourcing, and giving back increase the chances that they will celebrate anniversaries for years to come.