CPA firms no doubt know the challenges of tax season – but in recent years, it has become an increasing burden. With ongoing staffing shortages, increasing workloads, and time-sensitive deadlines…, many firms find themselves overwhelmed. That’s where outsourcing tax preparation comes in.
Rather than overwork existing employees or lose business, firms can grow their abilities by outsourcing. But what does it involve, and how does it all work? Let’s explore how.
Why CPA Firms Are Turning to Outsourcing
Each tax year is a balancing act of a hefty workload in a short timeframe. Firms are faced with a dilemma of quality, speed and human resources.
Industry experts report that the long hours required in busy months frequently result in staff burnout and turnover. This results in firms not having the staff they need when they need it.
Tax outsourcing can alleviate this problem by providing:
- Flexible capacity during peak months
- Reduced pressure on in-house resources
- Improved turnaround times
- Cost-effective growth without adding staff
Far from a band-aid solution, outsourcing is emerging as being about long-term growth.
How Outsourced Tax Preparation Works
Many think outsourcing equates to giving up control. Instead, it’s a process that involves a workflow that you control.
- Document Collection (Handled In-House)
Your firm still receives all the clients’ documents, including:
- W-2s, 1099s, and K-1s
- Previous tax returns
- Supporting financial data
After organizing documents, they are securely transmitted to the outsourced team using encryption.
- Data Entry and Organisation
The outsourced team handles:
- Entering data into your tax package
- Structuring financial information
- Initial calculations
They use your software and follow your established processes. This can save much time in itself, as data entry is a laborious task in tax preparation.
- Prepare Draft Tax Return
The tax preparation experts prepare a draft return, including:
- Individual returns (1040)
- Business returns (1120, 1120-S, 1065)
- Trust returns
They will also point out areas that need to be addressed and areas of concern, such as unusual deductions.
- Review and Approval (Firm’s Responsibility)
This is where you’re again in the driver’s seat.
- Your team reviews the draft
- Decisions are made, and changes are made
- You internally communicate with the client
- Final sign-off is done by your firm
The firm remains responsible for the final product, ensuring compliance and maintaining quality control.
What Stays Under Your Control
A firm’s concern with outsourcing services is that it will come at the expense of its own services.
The answer is no.
The following responsibilities always remain with your firm:
- Client relationships
- Strategic tax decisions
- Compliance responsibility
- Final review and filing
The outsourced team supports execution and provides recommendations. You can consider the team as a virtual resource doing routine and tedious work.
Here Are The Benefits Of Outsourcing
There are a number of benefits to outsourcing tax preparation, if done correctly:
Improved Efficiency
Outsourcing menial tasks allows your employees to provide value-added services such as planning.
Reduced Burnout
Reducing overtime in tax season results in higher retention and job satisfaction.
Scalability
Serve more clients without adding to your full-time staff.
Faster Turnaround
The increased support means quicker and more accurate processing.
How to Choose an Outsourcing Firm
Not all outsource partners are created equal. It’s important to choose the right partner.
- Knowledge of US Tax Law
Confirm the team’s familiarity with federal and state tax regulations, not just accounting.
- Data Security Measures
Ensure adherence to best practices like secure portals, encryption and user access.
- Defined Turnaround Times
Ensure turnaround times are established before the tax season.
- Quality Control Processes
Inquire about error rates, review processes and how errors are corrected.
Signs of a Successful Outsourcing Relationship
A successful outsourcing partnership can radically enhance the way a CPA firm staffs the tax season.
CPA firms that use this strategy may have:
- Reduced overtime for partners
- Increased emphasis on advisory work
- Ability to take on more clients
- Decrease in post-season turnover
Teams are more efficient and proactive, rather than stressed.
When Is the Right Time to Start Outsourcing?
The timing of outsourcing is important. The optimal time for CPA firms to start considering outsourcing partners is in the off-peak times (between tax seasons). This gives them plenty of time to assess, onboard and align workflows of the outsourcing partners along with a batch of returns. This allows for seamless communication, minimal mistakes and faster throughput during the busy season. Procrastination can happen at the last minute, and lead to decisions made under stress and inefficiency, so advanced preparation is vital to derive maximum value from tax outsourcing.
If Capacity Is Your Constraint, This Is Worth a Serious Look
Aurnex helps CPA firms prepare US federal and state tax returns while working within your existing software, workflow, and quality standards.
Our team has experience handling:
• Individual returns
• Partnership returns
• S-Corporation returns
• C-Corporation returns
• Trust returns
If you’d like to discuss your firm’s return volume, complexity, or software setup, you can book a quick call here: https://bookings.aurnex.com/#/aurnexus
You can also explore our US Tax Preparation Services.
The call takes about 30 minutes, and most firms know within the first 10 minutes if it’s a good fit.
Final Thoughts
When it comes to tax preparation, outsourcing isn’t about outsourcing your staff, it’s about enhancing them. Your firm can outsource routine and administrative work and focus on the core business of serving clients, providing advice and doing good work.
If your firm is struggling with tax season capacity constraints, consider outsourcing.
When done right, it can turn a potential weakness into a strength.
