Topics: Industry, Tax

5 Factors to Keep in Mind Before You Outsource Business Tax

Indrajeet Pradhan

Marketing Manager, QXAS North America

As an outsourcing firm, you will also be taking care of business tax preparation and filing for your clients. It will be fair to say that taxes can keep accounting firms up at night, especially during the tax season. Your firm burns the midnight oil to prepare and file taxes on time so that your clients do not incur any late payment penalties. Tax preparation for both individual and small businesses is the bread and butter of a typical accounting firm. Come tax season, and your accounting firm will be pouring over business tax rates and searching for the correct tax deduction and credits. The whole idea is to ensure you are able to optimize tax deductions for your clients to maximize tax savings.

As can be imagined, this isn’t an easy task. To give you a sense of the scope and scale of the work, a small business spends 2.5 billion hours on tax preparation. As can be imagined, accounting firms have their task cut out from them managing small business tax preparation. It’s a time-consuming task that often involves a back and forth with the client because they haven’t supplied enough information. This exchange means the assigned deadlines extend forever, and at times it is a fight to the finish.

So why get overwhelmed with taxes. Why wonder about configuring allowable business expenses for taxes and other related aspects. Why not outsource business tax preparation? This will help you manage time better and not get overburdened with tax-related work.



The above image gives you the low down on causes of stress. Workload is right up there at the top. Why get into a situation wherein your accountants are battling high levels of stress, trying to prepare taxes.


Yes, to outsource small business tax return preparation is a good idea. But have you got it all figured out? Have you strategized? Think of tax outsourcing strategically; this is the only way you can maximize value from tax outsourcing.

Here are some factors you must keep in mind to make the most of outsourcing tax returns:

1. Answer the question – Why?

Typically, outsourcing taxes is a big decision, taken right at the top. So, the case for taking this step must be strong. While affordability and bringing down the cost of each tax return is the lowest hanging fruit, there are other benefits to be had. Think long-term and think sustainable. Business tax outsourcing is not just about getting freedom from calculating and keeping up to speed with business tax rates. It is also about bringing new skillsets on board and also exploring new growth avenues.

2. Evaluating Expertise of the Provider

You know how to file small business taxes. But, is the tax outsourcing services provider an expert? Now you don’t know that, but there are some ways of ensuring that the provider is the real deal and knows US bookkeeping inside and out. First up, check whether the provider is willing to offer a trial run. If yes, take the trial. Typically, here, the business tax outsourcing provider will prepare a certain number of taxes for your firm. This will give you a clear idea of whether they know how to file small business taxes. You must note that the outsourcing provider will strive to impress, but you can still gauge their expertise during this time. Remember, there is a nuance attached to every business tax, and the calculation of business expense for taxes differs across different businesses. Therefore, you can evaluate the merits or demerits of the outsourcing provider based on their ability on this particular parameter and various others.

Also, you can interview the tax preparers or accountants who are going to work on your firm’s business tax preparation requirements. Please make sure they are experts in business tax rates and other aspects of tax calculation.

3. Flexible Scalability

Scalability and that too building immediate scalability with outsourcing is a good idea, but what of the lean season. Do you want to be locked into an engagement model that forces you to pay for services that you don’t need?

The answer is No.

Don’t worry – with business tax preparation outsourcing, you can work with a provider who offers you all the flexibility you need to build capacity for your firm. If you are looking for seasonal staff for your firm, you can add enough resources during the busy tax season, and remove some of these resources or all of them, when the tax season ends. Like we said earlier, strategy is everything. It would help if you strategized your outsourcing journey well in advance, which will help you maximize your ROI.

4. The Quality Question

Work with an ISO 9001 certified outsourcing provider that meets the highest standards of process quality. As someone with tax preparation expertise and more importantly someone who has handled a large number of taxes, you will know that errors and omissions are common. This typically happens because there is no time left for a thorough quality check.

But, the fact that such errors are common doesn’t mean you should be OK with it. Imagine a scenario wherein you have outsourced tax preparation, and the business tax rates haven’t been calculated correctly. Luckily, you were able to rectify this mistake quickly, but what if the errors are being ignored? You lose face with the client, and a loss of reputation can result in a loss of business in the long run. So, the terms of engagement with the tax services outsourcing provider must keep the quality perspective in mind.  A reputed tax preparation outsourcing services provider will not hesitate to sign a contract that includes demanding quality and deadline-centric SLAs.

5. Seamless Communication

You pick the phone during your business hours trying to get in touch with your tax outsourcing provider. But, it is late in the night, at the provider’s time zone, and you are unable to get through. This is an issue that you don’t want to face; therefore partner with an outsourcing services company whose outsourced tax preparers or outsourced accountants work according to your firm’s time zone. What’s more, the provider should have the means to ensure you are always on top of your tasks. A tracker app is an excellent idea in this case, and it will help you monitor the progress of all your outsourced tax returns and accounting-related tasks.

Outsource to the Right Tax Preparation Services Provider

State-of-the-art infrastructure, data security, accounting and tax expertise, engagement models, and pricing are just some of the parameters you must consider while evaluating a tax outsourcing services provider. The idea here is to work with a reputed provider with a successful track record of managing the business taxes of diverse businesses. In addition, it would be a good idea to also look for someone who is using the best tax software for small business. This allows your firm to get the benefit of digital transformation and pass it on to the client.

So look for a provider who brings the above efficiencies to the table before you sign that contract.

ABOUT Indrajeet Pradhan

My name is Indrajeet Pradhan and I am the Marketing Manager for QX Accounting Services – North America, and wordsmith behind the QXAS blog. Hope you enjoyed reading this piece. My job is to help accountants access the knowledge they seek through blogs, guides, and other content assets that are meaningful and actionable. More Posts(14)  

Originally published Jun 24, 2021 08:06:51, updated June 24 2021

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