As we navigate a world with COVID-19, large swings in the stock market have become the norm. Many buy and hold-style investors are more actively managing their portfolios to take advantage of these swings. The IRS has a special trader status for taxpayers who frequently engage in trading. This status includes a special accounting method, not available to the average investor, that can come with substantial tax savings. The status allows an investor to make special deductions and opens the door to a wide range of tax reduction strategies unavailable to the casual investor. However, with potential savings also come risks that could end up costing the taxpayer/trader more than the average investor. Weighing the pros and cons of this status is crucial in minimizing tax liability. The big question for tax planning is this — does obtaining trader tax status result in less tax?
Tax professionals must take measures to prevent unauthorized access to customer information. For example, you should limit access to customer data to only those employees who need it for their jobs. Also, outsourcing tax preparation in your firm can impact this security.
In October 2019, the IRS added a new question about data security responsibilities to the form to obtain or renew a PTIN. As a tax professional, it’s important to understand what the Gramm-Leach-Bliley Act requires and how you can comply.
Keep reading to learn what steps you can take to help protect the confidential information of clients and ensure GLBA compliance.