Tax Preparation Outsourcing 101: The Complete Guide for CPA Firms

Tax season remains one of the busiest times of the year, with accountants scrambling to fulfill tight deadlines while maintaining client confidentiality. Assume you have not explored tax preparation outsourcing before the forthcoming tax season. In that instance, you risk missing out and taking on extra labor you no longer require.

The world is changing, and your client’s expectations are rising. Top accounting firms have already embraced outsourcing, and we must accept the necessity of entrusting all boring chores to offshore tax preparers.

Outsourcing is a useful strategy for firms wanting to reduce expenses while increasing productivity. It is frequently associated with overseas workers taking over the responsibilities of your in-house staff. It is typically employed when your organization is developing and you require a reliable resource who can find possible deductions to unlock bigger refunds for your clients. Tax preparation services can give your accounting company an advantage during the busiest and most stressful time of year.

Statistics show that the United States government collected $4.05 trillion in revenue from taxes in 2021 in 2021. A record $2.04 trillion was raised alone from individual income taxes. This demonstrates the vast market and opportunity that awaits CPAs and accounting companies. Accountants are constantly moving, from keeping up with new tax legislation and engaging with clients to preparing the requisite papers and reams of data.

Tax preparation is complex and time-consuming, and outsourcing can help you save money and time. Accounting firms competing for clients are continuously looking for cost-effective tax preparation solutions. Accounting organizations of all sizes might profit from tax preparation outsourcing services. Apart from cutting costs by up to 50% or more, by supplementing the in-house team with highly skilled offshore tax preparers, outsourced tax preparation services can help CPA firms to:

  • Boost productivity & increase morale
  • Eliminate or reduce overtime costs
  • Refocus staff on high-value, revenue-generating tasks
  • Achieve faster turnaround times
  • Ensure data security

Let’s explore the scope of tax return outsourcing for accounting firms in the USA and understand the service in detail.

Read more: 5 Tips for CPAs to Improve Peak Tax Season Productivity

Tax Preparation Outsourcing: Things You Need To Know

According to the most recent IRS figures, approximately 144.3 million people in the United States pay taxes. The American tax system has a tax code that is more complicated than rocket science, and while most people think about taxes only in April, the process occurs all year.

Every year, millions of Americans submit tax returns. While some manage the filing procedure independently, most seek professional assistance from CPAs or accounting companies. This is due to the tedious and intricate nature of the process and the necessity for experience and knowledge of the most recent tax legislation.

CPAs and accounting firms get hundreds of tax returns each year to prepare and file before the deadline. Tax preparation, in addition to consuming a significant amount of time and effort, causes considerable burnout in accountants and has a negative impact on their mental health. Unfortunately, they cannot refuse such requests because it would jeopardize their business and earnings.

Filing taxes, whether as a person or an accounting firm, may be difficult. Not all accounting companies have the ability or skill set to handle the mounds of work that come their way during the busiest time of the year. Outsourcing such critical activities allows CPA companies to devote more time to core company functions. Given the intricacy and time-consuming nature of tax preparation procedures, outsourcing is the ideal option.

The primary purpose of tax preparation outsourcing is to complete the assignment on time without sacrificing quality. Outsourcing provides you with the benefit of receiving high-quality work from educated and experienced people while assuring compliance and data protection.

tax preparation outsourcing

The Process Of Tax Preparation Outsourcing

If you’re wondering what tax preparation outsourcing implies for your accounting firm, it means being able to assign time-consuming preparation tasks to a third-party service provider who generates a whole range of returns on time, accurately, and under budget. Even for competent accounting firms, tax season can be a nightmare and gets worse. The difficulties continue to mount due to last-minute changes, obtaining information and sending reminders to the client, and a talent deficit. And as the owner of an accounting firm, you are expected to meet all deadlines while maintaining increased productivity and lesser burnout.

Your in-house staff can focus on higher-value advising services while professional offshore tax preparers handle preparation and first-level reviews. Tax preparers must do more than merely prepare, calculate, and file income tax returns for businesses and individuals.

Outsourcing is not a one-step procedure; you must put some thinking and research into the tax preparation outsourcing process. So, where do you begin with tax preparation outsourcing? It’s as simple as 1, 2, 3!

Step 1: Define the goals

The first step is to ask yourself why you need to outsource and what you want to accomplish. Whatever the advantage of outsourced tax preparation services you intend to achieve, whether it is to cut expenses, harness great talents, manage risks, or expand in other areas, stating the goals helps design the contract.

Step 2: Strike a deal with the right service provider & candidate

To find the best outsourcing provider for your CPA company, conduct exhaustive research that includes everything from market research to competitor analysis. Once you’ve decided on an outsourced tax preparation service provider, the next step is to choose a candidate from the list of profiles they have in common. Global outsourcing service providers, such as Bestarion, enable you to conduct virtual interviews with their talent pool and select the best resource to operate as an extension of your CPA firm.

Step 3: Contract & Onboarding

Finally, establish a service-level agreement outlining the foundation for the outsourcing collaboration and begin onboarding the offshore tax preparers to your team.

Outsourcing is a win-win situation with multiple advantages. However, not every CPA business that decides to outsource knows about all the benefits of outsourced tax preparation services.

Benefits Of Tax Preparation Outsourcing

Although it is not a new concept, many people still need to learn about the numerous advantages of tax preparation outsourcing. Many CPA businesses use in-house tax preparation frequently to their harm. Apart from cost and time savings, these are the top 5 advantages of outsourcing tax preparation that you should consider.

Access to Qualified, Licensed Professionals

Any errors in tax filing might have disastrous effects on your accounting firm. Tax rules and rates are continuously changing, and we must comply. Not only may errors and mistakes in tax preparation result in significant cash loss, but they will also harm your firm’s reputation. Outsourcing tax preparation gives you access to competent tax specialists who are well-versed in and up to date on tax and regulatory innovations.

Top-notch Data Security

With rising data breaches, data security, and confidentiality are critical for your accounting firm. By collaborating with an outsourced tax preparation service provider, you can ensure that your precious, sensitive data is securely stored in the cloud using robust and cutting-edge security. Top accounting firms in the United States partner with outsourced service providers who use the most recent tax software versions, as well as the most recent security and encryption measures.

Stay on Top of Legislation & Tax Law

The finest outsourcing services prioritize keeping up with constantly changing legislation and tax regulations. The offshore team can easily accomplish this because they have a dedicated staff of tax preparers and professionals who read up on the law and regulations. The goal is that your outsourced service provider will have the capacity, skill set, and experience to manage your firm’s tax preparation while also being knowledgeable about legislation and tax rules.

Data Collection is Simple

One obvious advantage of outsourcing tax preparation is that it simplifies data collection. While most accountants are overburdened during the inevitable, busy tax season, staying on top of data collecting for a smooth tax filing process can take time and effort. Outsourcing makes it easier to contact someone when concerns arise, but data gathering, organization, and sorting are also expedited so that risks are minimized, and deadlines are fulfilled.

Peace of Mind

This is one of the most fundamental, often overlooked, advantages of outsourcing tax preparation. During the busy tax season, CPAs work inconceivable hours to ensure their customers’ tax returns are filed on time. They are oblivious to how this impacts their physical and emotional well-being. Outsourcing assists CPA businesses in striking the ideal professional and personal balance while dealing with tax-season stress. Having additional resources on your side helps keep the internal staff from becoming overburdened. Outsourced tax preparation services will provide comprehensive tax compliance and accurate tax estimation.

Read more: Outsourcing Tax Preparation: Pros & Cons

tax preparation outsourcing in vietnam

Creating A Tax Return Outsourcing Strategy

CPA businesses are frequently overwhelmed with work, particularly during tax season. Although this is the time of year when they have the opportunity to increase their revenue, it is more complex than it appears. Tax preparation can be time-consuming, and accounting business owners must be prepared to be constantly pressed for time. Working long hours and sifting through heaps of paperwork becomes a daily occurrence. Outsourced tax return preparation can help with this problem, but only if you plan to make the most of it.

Outsourcing strategies outline how an accounting company will collaborate with third parties to complete duties. It can reduce costs while increasing production without sacrificing work quality. These methods include rules, processes, and laws that govern issues such as who you collaborate with and how much you pay them.

Step 1: Outline Your Objectives

A company that sets its outsourcing goals is already ahead of the game. Accounting businesses should establish their outsourcing goals step by step to find the best staffing model. Defining defined outsourcing goals is also an opportunity to assess your company’s outsourcing needs. As a result, set clear outsourcing objectives early on.

Step 2: Define Financial Terms

You must establish the project budget and payment terms and determine whether you will pay the outsourced service provider on a time-worked or per-project basis. Setting deliverables before beginning the project is critical, and you must also budget for all business scenarios.

Step 3: Select a Preferred Engagement Model

When developing your outsourcing strategy, prioritize the capabilities you seek and why. Clearly defining the expertise you require makes selecting an outsourcing engagement model that meets your specific staffing requirements easy. You can choose from various outsourcing models based on location (onshore, nearshore, offshore, and onsite) and pricing.

Step 4: Risk Evaluation

This is a critical component in developing an outsourcing strategy. Accounting businesses must have a defined set of key performance measures to determine whether or not their outsourced engagement strategy is effective. Measuring the benefits and development of your firm’s outsourcing strategy and assessing the risks can assist you in taking remedial action at the right moment if staffing expectations are not realized.

Qualities Of A Reputed Tax Outsourcing Service Provider

According to recent statistics, 78% of firms worldwide are satisfied with their outsourcing service providers, and trustworthiness is still one of the top criteria when selecting an outsourcing partner.

Look at the top five traits of a reputable and trustworthy outsourced tax preparation service company.

1. Long and Proven Track Record

The greatest outsourcing service provider will have a long and verified track record. Determining how many clients they have helped scale and how long they have been in business is crucial. The more experienced an outsourcing partner is, the better choice they are compared to the others.

2. A Diverse Talent Pool

An outsourcing service provider can alleviate your staffing problems by providing highly skilled employees. Find out if your outsourcing partner has a specialized staff of experts that are qualified and seasoned professionals with tax preparation experience. You can interview and hire suitable candidates from the top outsourced tax preparation service providers.

3. Tight Data Security Measures

When selecting an outsourced service provider, data security is a vital factor to consider. Working with an outsourcing service provider that adheres to ISO 27001 requirements and employs robust and secure information technology solutions is preferable.

4. Flexible Engagement Models

A flexible working style is an important characteristic to search for. Your ideal tax prep outsourcing provider will offer different engagement options intended for scalability and make the onboarding process simple and painless.

5. Prompt services and exceptional support

On-time work delivery and great assistance are essential for a good outsourced service provider. They will ensure on-time deliverables and solid outcomes and be the best support system, so you can always count on them to fulfill your responsibilities.

When selecting a reputable outsourcing partner for your CPA firm, research, study your rivals, review testimonials, and look for the above characteristics.

The Benefits And Disadvantages Of Outsourcing Tax Preparation Services

Accounting firms benefit greatly from outsourced tax preparation services. However, as with any other alternative, you should research before collaborating with a third-party service provider. To make an informed selection, you must understand the benefits and drawbacks of outsourcing tax preparation services.

Outsourced tax preparation services have the advantage of faster turnaround times due to time zone differences when working with corporations headquartered in countries such as India. It assists in resolving personnel concerns, and your organization does not have to reject away profitable employment during tax season. The primary benefit is that you will have access to a greater degree of expertise. Outsourcing tax preparation services allows you to engage with tax preparers with vast expertise and skill sets, and you can expect timely and correct deliverables.

Accounting firms’ most typical problems are data security and communication hurdles. However, if you choose the correct outsourcing service provider, this should be fine. When outsourcing to a business like QX, you can expect rigorous data security measures and access to high-quality people with outstanding communication skills.

tax preparation outsourcing

Common Misconceptions Regarding Outsourced Tax Preparation Services

Outsourced tax preparation services offer several benefits, such as cost savings, security, faster response times, and cutting-edge infrastructure. However, some myths about tax outsourcing services keep accounting businesses from enjoying such benefits.

Let’s debunk some of the most popular fallacies about tax preparation outsourcing:

Myth 1: Data is not secure.

This is not the case if you select an outsourcing partner who has stringent data security procedures in place and employs sturdy and secure information technology systems. The top outsourcing service providers will be cyber essential, ISO 27001 certified, and information security compliant.

Myth 2: Tax Preparation Services Are Expensive

This widely held misperception regarding outsourced tax preparation services stops CPA companies from realizing some significant benefits. Companies that provide outsourcing services will only charge you for the services they supply, and you will save up to 50% or more on operational expenditures. You will not be required to pay for infrastructure or training.

Myth 3: Loss Of Control

Most accounting firms believe that outsourcing tax preparation will result in losing control. However, this is not true. A method and system are in place to control tax preparation properly. If you follow the process diligently, you won’t have to worry about losing control.

Myth 4: Clients Will Refuse to Accept Outsourcing

While most accounting companies believe that if they outsource tax returns, their clients will have multiple questions, the truth is that most clients trust that the businesses have done their due diligence before signing up for outsourced services.

Myth 5: It Is Illegal To Outsource Tax Preparation.

Many accounting companies are concerned that outsourcing their tax preparation would land them in hot water. However, as long as you have their permission, it is not unethical or illegal.

What Does Tax Preparation Outsourcing Cost?

Did you know that outsourcing tax preparation services might save you up to 50% on operational costs? Accounting businesses increasingly turn to outsourced tax preparation services to cut costs and focus on more profitable tasks. Tax preparation services are the most in-demand outsourcing services among CPA companies in the United States.

CPA businesses save significantly on infrastructure costs compared to keeping tax preparation in-house. Resources and infrastructure account for 50% of the expenditures associated with tax preparation tasks.

Most outsourcing providers base their pricing on your needs and the engagement strategy. They provide a choice of pricing structures to meet your company’s needs and budget. Reviewing and determining which engagement model is appropriate for your accounting business is advisable by analyzing each one.

Ad hoc or pay-as-you-go model

This is one of the most popular engagement models, and it entails paying based on how much you use the services. Typically, the tax preparation outsourcing firm establishes an hourly charge. These hourly prices may also differ based on seniority within the outsourced personnel. This strategy is popular since it provides a dedicated staff to work for you for a set amount of time. The ad hoc model best suits CPA businesses that only handle a little work.

Dedicated resource model or full-time employee (FTE) model

At a fixed monthly price, you will be provided with a dedicated staff to serve as an extension of your team under this popular engagement model. The fixed sum will be billed to the CPA firm at the end of each month, and the number of hours to be done during that period will be scoped by the outsourced service provider. If your accounting firm has a huge volume of work, this is a more cost-effective strategy than hourly rates.

Before signing on the dotted line, consult with your outsourced service provider and weigh the benefits and drawbacks of each partnership type. Most outsourced service providers provide free trials to assist CPA firms in determining what works best for them.

Wrapping Up

Tax preparation outsourcing can provide CPA companies with a significant competitive edge. Regardless of your challenges–whether you are understaffed, your team needs more skills and competence, or you are overloaded during tax season–outsourced tax preparation can help you expand your service portfolio.

Tax preparation outsourcing will assist you in boosting your client retention rates and meeting your client’s needs. Outsourcing your organization’s tax preparation will give you more time to focus on expansion and innovation and explore new specialized service offerings that will give your firm a competitive advantage.

Top accounting firms in the United States outsource tax preparation to reputable outsourcing service providers who set up cutting-edge communication, infrastructure, and processes to ensure minimal friction.


Bestarion Provides Customized Tax Outsourcing Solutions

Outsourcing tax preparation to Bestarion can help your business gain scalability, make huge cost reductions, and save more than 50%.

For over a decade, we have assisted CPAs, accountants, and EAs in managing their clients’ tax preparation needs. Bestarion has developed deep experience in US tax legislation and is current on all changes.

With us, you can stay on top of tax season, knowing that the greatest professionals will prepare your client’s returns using the latest technologies and meet the strictest data security requirements.

The Benefit When Partnering with Bestarion

By cooperating with our pioneer tax outsourcing firm, you may resolve personnel issues, cut costs, and boost your profits. Bestarion has been in the tax outsourcing business for years and has remained current with new tax regulations. Regarding data security, we likewise adhere to strict SLAs and high-quality requirements.

CPAs and accounting companies profit from Bestarion’ tax outsourcing services in the following ways:

  • Manager FTE solution to review outsourced work
  • Flexible engagement models
  • Quicker turnaround times
  • Substantial cost savings & Greater profitability
  • Enhanced client satisfaction
  • Comprehensive data security measures
  • More time to innovate and scale
  • Creative space to improve service portfolio
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