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Topics: Industry, Tax

Why CPAs Must Outsource Tax Preparation – 7 Strategic Benefits That You Did Not Know About

5 MIN READ | Posted on August 27, 2021
Written By Indrajeet Pradhan

Why CPAs Must Outsource Tax Preparation – 7 Strategic Benefits That You Did Not Know About

In the recent past, we have seen an overwhelming rise in outsourcing services providers offering tax preparation services for CPAs. Several small to medium (and often large) accounting firms run by CPAs opt to outsource tax preparation and bookkeeping. When the tax season arrives, maintaining accounts, preparing tax returns, and calculating the payable taxes suddenly becomes very important for businesses, companies, and organizations.

Consequently, during this time, CPA firms see an exponential rise in the work coming their way. This results in the staff getting overwhelmed with the workload. Sleepless nights are the norm, and accountants still cannot manage the tax season workload in a hassle-free manner. Most of time-sapping challenges come in the form of small and medium businesses who keep delaying tax preparation till the last minute. CPAs are hard-pressed for time, trying to get the information they need and coordinating with clients to provide the correct information.

There is an excellent chance that this can affect the accuracy and quality of output, and they are driven to seek out firms that provide outsourced tax preparation services. Delegation of the time-consuming responsibilities associated with tax preparation works to the advantage of an accounting firm, which can focus on other high-margin work coming their way in the tax season.

 Benefits of Tax Outsourcing for CPA Firms:

1. Maximizing Internal Resources: Outsourcing provides CPAs with the ability to get the most out of their team and operational processes. Most small and medium CPA firms operate on a tight budget. When the workload is extremely high during tax preparation season, they hire seasonal employees to scale their operations. But, in such cases, their overheads go for a toss – there is salary to think of, fringe benefits, insurance, infrastructure, training, on-boarding, etc. Once the tax season is over, the workload of the CPA firms’ decreases. These hired employees, thus, become redundant.

To avoid this additional increase in overheads and make the most of the in-house staff, many CPA firms outsource a part of their tax preparation services. Outsourcing helps them to scale yet save on resource costs. Here’s how:

  • It is relatively less expensive than hiring employees
  • Outsourcing companies can be hired for the short term as and when required
  • It frees up people who can concentrate on other essential job

2. Technology Disruption: Today, process automation is mandatory if you want to deliver flawless services to clients. The assistance of automated, technically advanced software defines the quality and accuracy of the production. However, process automation is expensive. For a small or mid-sized, or even a start-up CPA firm, availing of process automation presents the following challenges:

  • It requires a substantial initial investment
  • Regular maintenance incurs monthly charges
  • The software has to be periodically updated
  • Employees have to be trained regularly to maximize the use of this software

Outsourcing helps CPA firms to overcome these challenges. Thus, gaining access to advanced technology is one of the benefits of tax outsourcing for CPA firms.

Read: Improving Peak Tax Season Productivity – 5 Great Tips for CPAs

3. Optimizing Time: Accounting, bookkeeping or tax preparation are tedious jobs, but require dedication and skills to do it right. Inaccuracy in collecting, filling and calculation can lead to mistakes in tax preparation. When CPA firms are hard-pressed for time, and scrambling to get work done, they might assign the wrong employee to the wrong task. This can result in a few troubling scenarios:

  • Employees might not be qualified in the relevant area of work assigned to them, thus resulting in delays and inaccuracies.
  • The work assigned takes up a significant chunk of their time, and other work suffers

However, by outsourcing such tedious work, CPAs can ensure better utilization of their employees’ time. The quality of their services can also witness a significant improvement as they get the required dedication that they deserve.

4, Professional expertise: Outsourced tax preparation service providers have a team that comprises of expert tax preparers who have focused experience and expertise in the different aspects of tax legislation. But working with an excellent outsourced service provider, CPAs can gain access to superlative professionals and ensure work efficiency.

Additionally, outsourced service providers also keep their employees well trained and in sync with the latest advances and changes in accounting and tax.

5. Focus on core functionalities: In a CPA firm, the number of employees is generally limited. Hence, most employees have to multi-task irrespective of whether they have the desired qualification or training. At times like the tax season, when tax preparation and tax filing have to be done within a fixed date, the workload increases to the extent that individual performance suffers.

This means firms either cannot take up work related to their core functionalities or they are unable to give needed attention. There is another facet to this. What if a marquee client asks them to take care of payroll management during tax season? The answer is No. But this can put them in a fix.

The accounting firm has to either increase the number of people working in their team or outsource. Increasing employees, especially during tax preparation season, is neither time nor cost-effective.

Outsourcing proves to be a commercially and practically viable option since they already have the required experience, expertise, technology, and specialization.

6. Enhance the quality of work: Tax preparation requires accuracy. One tiny error in calculation can potentially set the client up for a hefty fine or the client becomes liable for questions from IRS. There is also the additional hassle of filing revised returns.

  • The additional hassles of filing revised returns

But the kind of infrastructure and employee support required to incorporate the necessary precision in tax preparation, especially when the workload is extremely large, is difficult to manage for many CPA firms. This is another significant reason why CPAs must outsource tax preparation.

7. Data Security: All CPA firms deal with highly confidential client information. If this information reaches the wrong person, the client company will suffer from huge losses. Leakage of any personal client information from a CPA firm would lose face and market standing. In severe cases, it might get embroiled in legal matters and be forced to close down.

Outsourcing the required aspects of accounts to third-party service providers eliminates the chances of mismanaged data security. Tax preparation outsourcing service providers implement security protocols that help them meet the needs of demanding regulations such as SOC 2 Type II. This ensures data is protection at all times.

Outsourcing is also a stress-buster. During the tax preparation season, when CPAs are bogged down with work and under extreme stress to ensure accurate calculations within the required time, outsourcing helps them speed up the process. This reduces pressure on the in-house staff and enables them to retain and even enhance the quality of work they generally provide. This also helps them achieve a work-life balance that typically is an alien concept amongst CPAs in the tax season.


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.

Originally published Aug 27, 2021 07:08:53, updated Aug 30 2021

Topics: Industry, Tax

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