There is no hiding; we are in an election season. Social media, cable news outlets and print news mediums are abuzz with a continuous stream of 2024 presidential election content on an array of topics (some trivial and others particularly important). However, one such area that is highly relevant to selecting a U.S. president is the area of tax policy. With this in mind, now is the time to best understand the tax policy positions of each candidate.

In the upcoming live (free!) webinar Tax Policies of the Presidential Candidates, an expert panel of Wolters Kluwer tax experts will speak on this very important subject.

Pressing tax matters at hand

In the last election of 2020, there were few tax policies at play between the two presidential candidates. That is not the case this time around. Due in part to the use of the budget reconciliation process in passing the Tax Cuts and Jobs Act of 2017 (TCJA), much of President Trump’s signature legislation comes with a built-in sunset date of 2025.

Only a small part of the TCJA is permanent. So, whoever wins the presidency this November will be tasked with working with Congress to decide what aspects of TCJA will be permanent versus what will regress back to the standards eight years ago.

TCJA deadlines in focus

With many TCJA sunsetting deadlines fast approaching, consumers will surely be calling/emailing/texting their respective tax pros shortly after election day for guidance on impacted areas such as:

• Individual taxation rates – Is change inevitable for the current TCJA tax brackets of 10, 12, 22, 24, 32, 35 and 37%?
• Capital gains/dividends – Will the TCJA capital gains rates of 0, 15, and 20% for capital gains and qualified dividends (based on individual status) change?
• Taxation of tips – What do each of the presidential candidates promise in this gig economy focused area of the economy?
• Social Security taxation – Will seniors have a reason for optimism in 2025?
• Child tax and earned income tax credits – Can taxpayers expect to retain or see increased credits related to these areas?
• Corporate tax rates – Will businesses that enjoyed the low 21% rate over the last eight years be in for a pleasant or unpleasant surprise as we enter 2025?
• Estate taxes – Will the double exclusion amounts for both estate, gift and generation-skipping transfer tax continue?
• International taxation – Where does each candidate stand on U.S.-connected income as well as industry specific tariffs (which are the primary forms of taxing foreign businesses)?

While the abovementioned areas (most of which are related to TCJA sunsetting provisions) are front and center on the minds of tax pros, they do not account for new proposals floated by each candidate over the last few weeks.

Be prepared for each presidential outcome scenario

In summary, as the campaigns of each candidate wind down, one will have to wait to learn which of the above-mentioned outcomes are most likely to occur. However, one does not have to stand still. NATP members are encouraged to attend a free, CPE credited live webinar Tax Policies of the Presidential Candidates on Thursday, Oct. 3, at 2 p.m. ET. Learn the tax policy specifics of both major presidential candidates (as we know them now) + much more.

Question: Neighbors Kim and Helen are eagerly anticipating the upcoming Fall Festival at their community church. Together they have been sewing stuffed pumpkins for the church to sell as a fundraiser at the event. They began by purchasing felt material, all of which is only being used for the festival pumpkins. The duo will receive no renumeration from the church for their efforts at all. In looking at potential charitable deductions for their individual Schedule A’s (Form 1040), Itemized Deductions, can Kim and Helen deduct the cost of the felt material being used to create the pumpkins?

Answer: Yes, each neighbor may use the amount they personally spent on the material for a charitable deduction, subject to the 60% AGI limitation. Unreimbursed out-of-pocket expenditures made in rendering gratuitous services to a charitable organization may be deductible [Reg. §1.170A-1(g)]. The expenses are treated as direct payments to the charity, rather than for the use of the organization (Rev. Rul. 84-61) so they are subject to the 60% of AGI limitation (30% if made to other than a 50% charity). The expenses must be nonpersonal, directly connected with and solely attributable to the rendering of such services (Rev. Rul. 69-473).

In today’s digital landscape, the protection of client data has become more critical than ever, particularly for tax professionals who handle sensitive financial information. The growing need for robust security measures has led to an industry-wide requirement for multi-factor authentication (MFA).

What is multi-factor authentication?

MFA is a security system that requires multiple forms of verification before granting access to a system or data. This process involves more than just a password; it includes a combination of factors such as something you know (a password), something you have (a mobile device for a text message or push notification) and sometimes something you are (biometrics like a fingerprint or retinal scan).

While the term “multi-factor” might seem daunting, it is quickly becoming a standard in data security. Currently, tax professionals are required to have at least two types of authentication in place. Because most MFAs require two factors, it is sometimes referred to as two-factor authentication. As data breaches and cyber threats continue to rise, the industry is expected to move toward even more robust forms of MFA.

Why is MFA a requirement now?

The push for MFA is not a recent development. Its origins date back to the late 1990s with the Gramm-Leach-Bliley Act, which established safeguards for financial institutions to protect client data. In 2021, the Federal Trade Commission (FTC) updated its safeguard rules, mandating specific operational changes that went into effect in June 2023. These changes included the requirement for financial institutions, including tax firms, to implement MFA as a crucial security measure.

For tax professionals, the benefits of the MFA requirement extend beyond compliance; it is about protecting clients and the integrity of tax practices. Given the increasing frequency of cybersecurity attacks, relying solely on passwords is no longer sufficient. MFA adds an essential layer of protection, ensuring that unauthorized individuals cannot easily access systems and client information.

What systems need to be protected?

What data and systems need to be protected with MFA? The answer is straightforward — all client data should be safeguarded. It is more effective to protect all data rather than selectively deciding which information requires protection.

In terms of systems, any system that has access to client data should be protected by MFA. This includes:

• Computer logins
• Locally installed tax preparation applications
• Internal systems storing client data
• Cloud-based applications (e.g. cloud-based tax or bookkeeping software)

For additional security, extend MFA protection to all accounts including social media and personal accounts to ensure that no avenue is left vulnerable to attack.

Consequences of non-compliance

Failing to implement MFA can have severe consequences. The penalties for non-compliance with the FTC’s safeguards can exceed $100,000. Even more alarming is the possibility of personal liability if a breach occurs, and the tax professional is found negligent.

The damage, however, isn’t limited to financial penalties — reputation is also at risk. For some firms, the reputational damage caused by a data breach can be catastrophic, potentially leading to the closure of the business, even if the financial impact is managed.

Overcoming the barriers to MFA implementation

Despite its importance, many tax professionals are hesitant to implement MFA due to perceived cost and inconvenience. However, the cost is minimal, with many software providers offering MFA at little to no extra charge. The real challenge lies in adapting to the added steps required by MFA, but given the high stakes, this inconvenience is a small price to pay for securing a business and its client data.

Staying informed and connected

It is crucial for tax professionals to stay informed about the latest security requirements and best practices. Regular training for firm owners and staff is not just recommended—it is mandated by the FTC safeguards. NATP encourages all tax pros to take advantage of the resources available through the organization, including courses and peer support.

Multi-factor authentication is not just a compliance requirement; it is a vital tool in protecting tax practices and clients from the ever-growing threat of cyberattacks. For those who have not yet implemented MFA, now is the time to do so.