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10 Reasons Why Outsourcing Tax Preparation Is Here To Stay

10 Reasons Why Outsourcing Tax Preparation Is Here To Stay
Ryan McInnis

For most businesses, partnerships and individuals, outsourcing tax preparation is part of the plan to prepare for tax season. Whether it is a small business, a professional sole practitioner or even a large corporation, external experts are important to ensuring that taxes are prepared precisely and accurately, in compliance with the latest tax laws. Even the in-house accounting departments of Fortune 500 corporations work with external auditors and firms to manage tax preparation and submission.

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For most businesses, partnerships and individuals, outsourcing tax preparation is part of the plan to prepare for tax season. Whether it is a small business, a professional sole practitioner or even a large corporation, external experts are important to ensuring that taxes are prepared precisely and accurately, in compliance with the latest tax laws. Even the in-house accounting departments of Fortune 500 corporations work with external auditors and firms to manage tax preparation and submission.

Despite the popularity — and, indeed, the necessity — of outsourced tax preparation in spotting savings opportunities and avoiding disruptive and unnecessary audits, some accounting firms may be concerned about outsourcing their own or their clients’ routine tax preparation. Because CPA firms regularly perform accounting services and have their own expertise in tax management and planning, they may have more confidence in their skill and awareness of the complex aspects of business taxation. However, accounting firms can enjoy significant benefits from outsourcing tax preparation, and these benefits mean that the practice is becoming more popular in the industry — and is here to stay.

In essence, outsourcing tax preparation means turning to external experts to process and manage the preparation of tax documents for businesses and individuals. For accounting and CPA firms, this means that rather than shifting to massive overtime hours during tax season or hiring many seasonal associates, you can turn to an external firm like Picnic Tax Enterprise to manage and handle the volume of tax preparation requests from your clients. Outsourcing firms ensure high-quality work and take care of vetting, approving and training the individual CPAs and tax preparers doing the job. Much like outsourcing IT or other specialized skills, outsourcing tax preparation provides more time and resources for accounting and CPA firms to grow their businesses, work more efficiently and manage client relationships effectively.

Overview of the benefits of outsourcing tax preparation

There are many benefits of tax prep outsourcing for accounting and CPA firms. Experience has shown that this is a sustainable option that continues to provide significant financial and reputational benefits for firms using an outsourced option. Here are some of the detailed reasons why outsourcing tax prep can be the right choice for your firm.

Reason #1: Increased efficiency

Put simply, outsourced tax preparation increases efficiency for accounting firms. Tax season brings with it increased demand on accounting firms as new clients send in tax materials and existing clients also come to the firm with tax questions. In fact, tax season can overwhelm the normal scheduling and work functions of many accounting firms, leaving CPAs and business owners with little time to spend on key customer relationship work, forward-looking accounting and other higher-margin work.

Time savings for accounting firm owners

The backlog may be so great that accounting firm owners are forced to hire temporary or seasonal workers for tax prep services only. They may need to provide training and resources for new employees or dedicate a significant amount of time to managing schedules and time management for staff accountants. In short, the management of others’ tax prep work can overwhelm the schedules of accounting firm owners. By relying instead on outsourced tax preparation services, owners can focus on their priorities first and work with a professional outsourcing firm to handle the rest.

Ability to focus on core business activities

This also means that firm owners and CPAs have more time to focus on core business activities, rather than hiring and training temporary tax preparers. Whether that is business development, advertising and sales or working with clients to plan future tax strategies, these higher-margin activities are a more efficient use of time than routine tax prep.

Reason #2: Access to expertise

outsourced accounting

Accounting firms know that tax preparation requires expertise. Tax laws are updated every year, and business tax preparation can involve looking for unique savings opportunities and eligibility for various programs. Rather than decreasing the level of expertise in your firm, outsourced tax accounting can provide greater access to meaningful expertise.

Outsourcing tax preparation can tap into specialized knowledge and experience

The tax prep outsourcing company you work with makes sure to hire and train CPAs, accountants and tax preparers with high levels of skill and knowledge in these areas. They can assign returns to professionals with specific areas of interest and skill, with a wider range of expertise and specialties on their team. Rather than having to train your staff and associates internally, the outsourcing firm takes care of this on its own — and your firm reaps the benefits.

Opportunity to work with experienced professionals who stay current with tax law changes

This applies not only to general principles of tax preparation but also to annual changes in tax law. For tax prep outsourcing firms, tax preparation is what they do. This means that up-to-date knowledge about changes to the law is a central aspect of their business, so you can rest assured that clients receive accurate and timely outsourced tax prep services.

Reason #3: Cost savings

One concern that some accounting firms have when considering outsourced tax accounting is the cost of hiring an outsourcing firm. Certainly, when you work with a professional outsourcing firm, there are fees involved. However, those fees go to ensure the efficient and accurate work discussed above — and often wind up far smaller in monetary terms than handling your tax prep services in-house.

Reduced overhead costs

For example, overhead costs decrease significantly. The cost of paying overtime to associates or bringing on a number of seasonal employees for tax prep can quickly overrun the cost of hiring an outsourcing firm. Not only do you need to manage direct costs in terms of salaries, computers and other equipment, but there are also many indirect costs, including training time, software licenses and supervision and management time spent reviewing the work of overstressed or brand-new employees.

Ability to take advantage of bulk pricing for large volumes of tax returns

Another reason why outsourced tax accounting is here to stay is that outsourcing firms are willing to work with their clients for bulk pricing. If you are bringing large volumes of tax returns to a tax prep outsourcing company, they will offer you bulk pricing rates that further cut down your overhead costs, with clear savings associated with each client they handle.

Reason #4: Improved accuracy

As an accounting firm, you take pride in delivering precise and accurate work to your clients. If you hesitate to turn to an outsourcing firm, it may be because you are uncertain about the quality and accuracy of external work. However, accounting firms have found that outsourced tax preparation routinely results in an improvement in accuracy across the board.

Outsourced tax preparation can result in increased accuracy

In short, outsourced tax prep professionals only handle tax preparation, not the other parts of running an accounting firm. They have high standards and want to ensure a good reputation in the industry and long-running contracts. Therefore, they have a strong incentive to deliver quality work in their unique, specific area of expertise.

Reduced risk of mistakes and errors

Tax time is well-known to be an overwhelming season for accounting firms, especially those that do not outsource tax prep. Overwork and stress are major contributors to mistakes and errors in the final product. By working with an outsourcing firm, you are reducing the risk of errors in your clients’ tax documents.

Reason #5: Improved compliance

As we noted before, outsourced tax preparation services are careful about staying up to date with the latest developments in tax law, from state to state and business to business. This means that working with specialists in a particular area can improve your compliance record, decrease audit risks and improve client relationships.

Outsourced tax preparation can make your firm more familiar with tax laws and regulations

Again, tax prep outsourcing firms are specifically dedicated to tax preparation and the annual changes that come with new tax laws and regulations on the state, federal and international levels. Outsourcing firms can share the details of their information and reasoning for tax prep decisions with your firm, increasing your own skill and expertise in these areas. This is especially important for handling out-of-state filings, international filings and other more complex tax prep.

Reduced risk of non-compliance and penalties

By gaining access to high-level and specific expertise in these areas, your firm is also reducing its risk of non-compliance, penalties for accounting firms submitting inaccurate reports and potentially lowering audit risk for clients. This can benefit the client relationship as well as the firm’s reputation over the long term.

Reason #6: Improved record-keeping

Record-keeping is critical for any accounting firm. You want to be able to access your clients’ past tax returns, documents and receipts as quickly and easily as possible when preparing for a meeting, answering questions or performing additional work. Even though the work is being done outside your firm, outsourced tax preparation can actually help you to improve your record-keeping.

Outsourcing tax preparation can help with accurate and organized record-keeping

Outsourcing firms like Picnic Tax Enterprise will provide you with easy-to-use files and folders full of all your relevant client data for easy export to your internal records. Each client file will be carefully organized without confusion with other clients’ files or materials. After the outsourced tax prep is complete, all files can easily be transferred to your own record-keeping system. You can also return to your outsourcing provider for the files in most cases if you have an error or find missing documents in your own records.

Improved organization and easier access to tax documents

Outsourced tax preparation services use a standard system to organize tax returns and other documents. This means that when you download and store these documents in your own system, it is easy to locate the right document by looking for the right keyword or file name. You’ll instantly know which document you are looking at in the file.

Reason #7: Increased flexibility

Accounting firms need all of these benefits, from improved compliance to greater efficiency. Working with outsourced tax accounting also provides greater flexibility and agility for your firm, allowing you to take on new clients and additional work without fear of overwhelm.

Outsourcing tax preparation can provide you with increased flexibility during busy season

Tax season will always be a busy season for accounting firms, even if you work with an outsourcing company. However, rather than being a season for overwhelm and difficult-to-handle stress, tax season can be an opportunity to take on new clients. You won’t need to turn clients away out of concern that you will not complete their documents on time, and you won’t need to rush through a hiring process without being fully satisfied. Instead, you can remain confident in your firm’s ability to handle new questions, even during tax season.

Ability to scale up or down as needed

Many accounting firms need to grow during tax season to handle demand, but that same level of demand does not exist year-round. Tax prep outsourcing essentially exists to make these fluctuations normal and easy to manage. Your business can grow at a sustainable pace by working with a provider that aims to make that possible.

Reason #8: Improved data security

outsourced accounting data security

You may have concerns about sharing client data outside of your firm. However, leading tax prep outsourcing firms like Picnic Tax Enterprise rely on highly secure systems to ensure that their clients’ data is securely protected. Because they operate at a large scale, they can actually provide much greater protection in many cases than smaller firms relying on their own solutions.

Outsourced tax preparers typically have secure systems in place to protect client data

Security is a major selling point for outsourced tax accounting. Outsourcing firms have a competitive edge when they can show that they use the latest, most reliable technology to ensure that clients’ files remain secure. Rather than just sending files through regular email, they typically rely on systems with secure access to keep your clients’ sensitive financial information private and protected.

Reduced risk of data breaches and identity theft

Data breaches and identity theft are major concerns, especially when you are handling sensitive financial information with valuable data for any identity thief or corporate hacker. Picnic Tax Enterprise uses the latest encryption protocols at all times to minimize the risk of breaches and keep your clients’ data securely stored.

Reason #9: Improved customer service

You may be concerned that you may not be able to provide your usual high level of customer service when working with outsourced tax preparation services. On the contrary, customer service can actually improve, as owners and managers at accounting firms have the time to provide a personal touch to their clients. In addition, outsourced tax preparers can directly answer questions and provide support through white-label tech solutions.

Outsourcing tax preparation can result in personalized attention and support to clients

As a firm owner, clients may call on you to provide specialized support and service. Because your time is not overwhelmed with the demands of in-house tax prep, you are better placed to deal directly with major clients. In addition, outsourced tax preparation also allows all clients to receive fast answers or communicate with their tax preparer.

Ability to ask questions and get timely responses

At Picnic Tax Enterprise, our API integrates directly with your firm’s technology to allow clients to directly communicate with the accountant handling their tax prep while retaining white-label service with your branding and gateway. Our accountants are US-based, with local time zones that suit your client’s needs, so communication is quick and easy.

Reason #10: Improved tax planning

Tax planning, strategy and management are important, high-margin areas of work for accounting firms. When you are not forced to spend most of your time on direct tax prep services, you can provide more expansive tax planning services for clients, providing a greater focus on your core functions and knowledge.

Outsourcing tax preparation can free up time so you can focus on helping your clients with tax planning and strategy

Outsourced tax preparation services give you the time to work directly with clients on future planning and strategies for future tax years, not only filing annual returns. These are the kind of value-added services that cement the client relationship and provide high value to the firm.

Opportunity to optimize tax liability and maximize tax benefits

Tax planning is all about savings and benefits for future years, as clients tailor their tax strategies to access exemptions and reduce their liabilities. When your firm can concentrate on this kind of work, your clients can see the value directly in their bottom line.

Whether your concern is improving your focus on core business like tax planning and strategy or increasing efficiency, expertise and data security, outsourcing tax preparation provides an array of benefits to accounting firms. It provides significant financial and reputational advantages while reducing overwhelm, stress and uncertainty during the busy annual tax season. All of these benefits mean that outsourced tax preparation is here to stay and in many ways represents the future of accounting. From small firms to large providers, you and your clients can find a mutually beneficial solution through tax prep outsourcing.

Contact Picnic Tax Enterprise to learn more about how our tax prep outsourcing services can help your firm improve your bottom line while increasing efficiency and client satisfaction.

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