Recently signed by President Joe Biden, this new legislation comes with some tax law changes that may affect you.

There’s been no shortage of discussion on Capitol Hill over the last few months over the Inflation Reduction Act. This is a slimmed-down version of the Build Back Better Bill, which never made it out of Congress. President Joe Biden sign it into law on August 16, 2022.

What does this mean for you? It depends. Major provisions in the new law were designed to address climate change and slow down the trajectory of global warming. This translates into green energy credits for your home and vehicle. Other elements that affect individual taxpayers relate to health care. For example, are you on Medicare and take certain medications? Do you count on premium assistance for Affordable Care Act coverage?

The legislation will affect large corporations in a big way (a new 15% minimum corporate tax and a 1% excise tax on stock buybacks), but it will also have impact on some smaller businesses. Have you experienced problems getting through to the IRS with questions or problems? Do you have concerns about how the federal budget deficit could affect your taxes?

Let’s look at these new provisions.

Green Energy Tax Credits

If you have bought or are planning to buy energy-efficient doors and windows and appliances (air conditioners, water heaters, furnaces, etc.), you may be familiar with the Nonbusiness Energy Property Credit. It expired at the end of 2021 but has been extended through the 2022 tax year. There were numerous restrictions on this credit that may have made you wonder if it was worth the trouble of replacing major household items.

The Nonbusiness Energy Property Credit was discontinued at the end of 2021 but has been reinstated for the 2022 tax year.

The Inflation Reduction Act replaces that old credit with the Energy Efficient Home Improvement Credit. Beginning in tax year 2023, the credit will:

• Be equal to 30% of all the costs you incur making qualified home improvements.
• Include your costs for home energy audits, some boilers and biomass stoves, equipment related to electric panels.
• Not apply to air-circulating fans or roofing.
• Be subject to updates of the energy-efficiency standards.

Annual limits for some kinds of eligible improvements will be increased. For example, you’ll be able to claim up to $2,000 for some heat pump water heaters, biomass stoves and boilers, and gas heat pumps. You’ll get a $600 credit for energy-saving items like some furnaces and air conditioners, water heaters, and exterior windows ($250 for an exterior door).

There’s no more $500 lifetime limit on energy credits. Rather, you’ll be able to claim up to $1,200 annually. But you’ll be required to provide more purchase documentation after 2024. The manufacturer will have to give you a product identification number for each item you want to claim that will go on your tax return.

The Clean Vehicle Credit

There have been tax breaks for buying electric vehicles since 2009. Internal Revenue Code (IRC) Section 30D (still in force today) allowed tax credits of up to $7,500 for electric vehicles, fuel-cell (hydrogen) vehicles, and plug-in hybrid electric vehicles. This credit is nonrefundable, meaning you can’t claim more than you owe in taxes for the year you bought it and put it into use. If you owe $6,000, for example, that’s the maximum credit you could claim.

IRS Form 8936 for the 2021 tax year

This credit hadn’t changed until the Inflation Reduction Act came along. Congress tried to increase it to $12,000 in the Build Back Better Bill, but that piece of legislation was never passed by the Senate.

The credit remains at $7,500 and has been renamed. It’s now the Clean Vehicle Credit, which will be in place for eligible vehicles put into service after December 31, 2022.

It’s going to be harder to claim the credit because of new provisions in the Inflation Reduction Act. There are two sets of restrictions, one for the first $3,750 and another for the second $3,750. Both have to do with where the materials for batteries are mined and where they’re manufactured. The U.S. isn’t an industry leader on either count, but Congress is working on it.

Other Provisions of the Inflation Reduction Act

Protection of the environment is a critical element of the new legislation, but there’s a lot more that might affect you. For example:

• Medicare. There will be an out-of-pocket maximum of $2,000 annually for drug costs. Medicare will be allowed to negotiate on a few drug prices in a few years. The number eligible will continue to increase.
• The Affordable Care Act. Premium assistance has been extended to 2025.
• Reducing the deficit. The goal is $300 million.
• New agents added to IRS workforce. 87,000 of them ($80 billion). Many of them will be hired for “enforcement” (audits), but there will be money for improving customer service and general operations.

Many of the details in the Inflation Reduction Act are still not available, but we continue to learn as much as we can. Stay tuned as we all find out more about the impact of this massive new legislation. And remember that we can always meet with you to talk about general income tax planning, no matter what time of year it is.

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Do you know how the Inflation Reduction Act might affect your taxes? We can look at your financial situation to see.

The Inflation Reduction Act offers a $7,500 electric vehicle tax credit, but it’s harder to get than it used to be. Ask us about this.

The Inflation Reduction Act includes increases in the amount of home energy tax credits you can claim. We can tell you about these.

The Inflation Reduction Act is focused on protecting the environment, but there are many other tax-related provisions.

QuickBooks Online provides numerous ways for you to know which customers owe you money – and who is late.

There are so many financial details to keep track of when you’re running a small business. You have to make sure your products and services are in good shape and ready to sell. You have to stay current with your bills. Orders need to be processed as quickly as possible, as do estimates and invoices. And you may have numerous questions from customers and vendors that must be addressed.

Your number one priority, however, is ensuring that your customers are paying you. Whether you accept credit cards or bank transfers or issue sales receipts for cash and checks, you need to always know where you stand with incoming payments. “Are my receivables current?” should be a question you’re asking yourself or your staff frequently.

QuickBooks Online offers numerous ways to know whether you’re being paid for your products and/or services and who might be falling behind. That information is critical to your understanding of how your receivables are stacking up against your payables. You should be able to gauge whether you’re making a profit, staying even, or losing money. Here’s a look at the tools you can use.

Learning When You Launch

QuickBooks Online provides a good overview of your current cash flow as soon as you log into the site and see your two-pronged Dashboard. The first thing you see when you click the Business overview tab is a cash flow forecast that goes up to 24 months. Other content includes a profit and loss graph and charts showing expenses, income (including open and overdue invoice totals), and sales. Your account balances are there, too.

This is helpful data, but it’s broad. To get far more detailed information, hover your mouse over Sales in the toolbar and select All Sales. The horizontal bar across the top displays dollar and transaction totals for estimates, unbilled activity, overdue (invoices), open invoices, and (invoices) paid last 30 days. When you click one of the bars, the list changes to show only that particular set of transactions.

Partial view of the toolbar at the top of the Sales Transactions page

The table of transactions is interactive. That is, there’s an Action column at the end of each row. Click the down arrow next to any of the activity listed there, and you’ll see a menu of options. Depending on the status of each, these options include commands like Receive payment, Send reminder, Print packing slip, Send, and Void.

Running Reports

The Sales Transactions page provides more of your receivables nuts and bolts than the Business overview screen does. But to get the most in-depth, customizable, comprehensive view of who owes you, you’ll need to run reports. Click Reports in the toolbar and scroll down to Who owes you.

There are three columns here. You’ll land on Standard, which is a complete list of all of the pre-formatted reports that QuickBooks Online offers. Click Custom reports to see the reports you’ve customized and saved. Management reports opens a list of three reports that can be viewed by a variety of date ranges: Company Overview, Sales Performance, and Expenses Performance. You can view, edit, and send these, as well as export them as PDF and Microsoft Word files.

There are five reports listed under Who owes you that you should be creating on a regular basis. How regularly? That depends on the size of your business. The greater your sales volume, the more frequently you should run them.

When you select A/R Aging Summary, you’ll see at a glance which customers have current balances and those that are 1-30, 31-60, 61-90, and 91+ days past due. A few customization options appear at the top, like Report period, Aging method, and Days per aging period. To really zero in on the precise data set you want, click Customize. The panel that slides out from the right contains option in several areas: General, Rows/Columns, Aging, Filter (by customer), and Header/Footer.

QuickBooks Online helps you target the data set that you want.

There are four other reports that can help you track your receivables:

• Open Invoices displays a list of invoices that still contain a balance.
• Unbilled Time tells you about any billable time that hasn’t been invoiced.
• Unbilled Charges lists billable charges that haven’t been invoice.
• Customer Balance Summary simply provides all open balances for you customers.

These are all very simple reports that you shouldn’t have any trouble customizing and running. They can give you a complete picture of where your receivables stand. But there are other reports that will require our help. These are standard financial reports that should be created monthly or quarterly, including Statement of Cash Flows, Profit and Loss, and Balance Sheet. You’ll need these critical financial statements if, for example, you’re applying for a loan or trying to attract investors. Please let us know if you want us to run and analyze these so you can get a detailed, comprehensive view of your financial health.

It’s important to categorize transactions, but it takes time. If every day brings several dozen into QuickBooks Online, you can automate this process.

One of the cardinal rules of accounting is this: Go through your new transactions every day. If you wait until there are too many of them, you’re likely to give them short shrift. You may miss problems, just as you might skip categorizing some of them because it simply takes too long.

But correct categorization is essential. Your income taxes and reports will not be accurate if you fail to assign the right category to all of your transactions. QuickBooks Online makes this easy.

The site also provides a way for you to accelerate the process by automating it. It allows you to create Rules. That is, if a transaction contains a specific piece of information, a name or an amount, QuickBooks Online allows you to indicate how it should be categorized. This kind of automation will save you time and may even prevent errors – as long as you use it carefully. Here’s how it works.

Defining Your Rules

We’ll use an easy example to explain how QuickBooks Online’s Rules work. Let’s say your shipping costs have started to increase lately, and you want to make sure you’re seeing any UPS transactions that go above a specified dollar amount, and that they’re categorized accurately. Hover your mouse over Transactions in the toolbar and click on Banking (assuming you’re downloading your bank transactions). Select an account to work with by clicking on it, and make sure the For review bar is highlighted.

Click on a transaction to open it. (If you’ve never explored what you can do with a downloaded transaction, study this box carefully while you’re there, and contact us with any questions.) On the bottom line, you’ll see a link labeled. Create a rule. Click on it, and a panel slides out from the right, as pictured below:

The upper half of the Create rule panel

This portion of the Create rule panel is fairly self-explanatory. Give your rule a descriptive name (we entered UPS 25 Plus) and indicate whether it should be applied to Money in or Money out. If you want to select a specific bank account or card, click the down arrow in the field to the right and select it. Otherwise, choose All bank accounts. Next, decide whether a transaction has to meet Any of the conditions you’re going to specify or All of them. In this case, we want All.

Now you have to describe the conditions under which a transaction will be affected. We want transactions whose Description Contains The UPS Store. We also want to identify purchases from The UPS Store whose total is more than $25. So you’d click + Add a condition. In the row that opens, click the down arrow in the Description field and select Amount. Click the down arrow again in the next field and choose Is greater than. The final field in the row should contain 25.00.

You could keep adding conditions, but that’s all we need for this rule. You can click Test rule if you want to find out how many transactions in your For review list would meet your specifications.

Next, you want to Assign attributes to the transactions selected. Your options here are Transaction type, Category, Payee, Tags, Class, and Memo. The first two are required and the third is recommended. The last three are optional. If you want QuickBooks Online to automatically confirm transactions this rule applies to, click the Auto-confirm button so it’s showing green. If you choose this option, your matching transactions will be modified to meet your criteria and moved directly into the Categorized queue. You won’t see them in For review. So consider this carefully.

When you’re done here, click Save.

The lower half of the Create rule screen

Warning: QuickBooks Online allows you to create new categories directly from this window. But accurate categorization is so critical that we’d rather you schedule a session with us to go over your list of categories and make any modifications necessary.

To recap: Any expense over $25 that comes into your For review queue whose Description reads will be automatically categorized and moved into the Categorized queue.

QuickBooks Online’s Rules can save you time, but if they’re not created correctly, you may have errors in your company file without even knowing it. We recommend that you let us help you set these up from the start to avoid this. If you’re new to downloading transactions onto the site, you may also want to consult with us.

If you have one or more people besides yourself using QuickBooks Online, you’ll need to know how to set up their accounts.

Your QuickBooks Online file contains a great deal of very sensitive information, like customers’ credit card numbers and employees’ Social Security numbers – data you don’t want to have fall into the wrong hands. You obviously trust your employees or you wouldn’t have hired them, but when it comes to security, you should implement all the safeguards you can.

QuickBooks Online can help you stay safe by limiting the access that other users have to your company file. Here’s how it works.

To get started, click the gear icon in the upper right and select Manage users. You should be listed there, of course, as the Master Administrator. Click Add user. The screen that opens will ask you what type of user you’re adding. There are four of them:

• Standard user. You can assign full or limited access to standard users, but they won’t have administrator privileges.
• Company admin. At this level, the user can see and do everything.
• Reports only. These individuals have access to all reports except those that contain payroll or contact information.
• Time tracking only. You’d assign this type to employees who only need to enter their own timesheets.

The first step in adding a user in QuickBooks Online is to specify their type.

The first two count toward your user limit, but the second two do not. Make your selection and click Next. We’ll select standard user for this example.

On the screen that opens, you’ll be assigning actual access rights, telling QuickBooks Online what the user’s restrictions are. You can choose All (with or without payroll access), None (allows some activities), or Limited. Select Limited, then click in the box in front of Customer to create a check mark. You’ll see the list of specific actions that that individual can take (like creating invoices, sales receipts, and statements) and the screens that they can see (customer registers and reports, tax rates and agency settings, etc.).

There’s also a list of what they can’t do, including printing checks, viewing bank registers, and preparing a sales tax return.

Click in the box in front of Customer again to uncheck it and select Vendor. You’ll see a similar list here of what your new user can and can’t do, only its activities relate to your accounts payable.

QuickBooks Online provides lists of what standard users can and can’t do and see for both customers and vendors.

Click Next If the user will be entering his own her own timesheets in QuickBooks Online, click the button in front of Yes, then select the correct name from the drop-down list. Click Next. Answer the user settings questions on the next screen and click Next. Enter the user’s name and email address (user ID), then click Save. QuickBooks Online will return you to the Manage Users screen, where you’ll see that your new user has been added to the list. The individual you just invited will receive an email invitation to set up an account, with instructions on how to do so.

Other Security Tips

There are other ways you can keep all of your company’s data safe. Here are some suggestions to consider if your business has returned to its offices.

• Always update your operating system and applications when prompted. These often contain security patches in addition to bug fixes and new features.
• Keep backups out of reach of others. Cloud backups are best, but if you use a local device, don’t leave it out in the open.
• Log out of QuickBooks Online when you’re not at your desk.
• Shred anything you print from QuickBooks Online or store it in a locked drawer.
• Protect your networks. Discourage excessive web browsing by employees. Don’t allow extraneous app downloading on company equipment and ask employees not to use company mobile devices on public networks. Consider network monitoring software if you can’t afford managed IT.

We follow security best practices in our own offices, and we hope you’ll do the same. Applying safeguards proactively will help prevent data theft that can be nearly impossible to recover from.

Intuit employs industry-standard security practices to keep your data safe, too, and it handles all backup and upgrades. Often, those updates include new features, like the recent addition of transaction “tags.” Let us know if you need our help with these or with any other element of QuickBooks Online.