Outsourcing tax preparation responsibilities can provide businesses with myriad benefits, but like every option that businesses have, you should do your research before you sign on the dotted line. Here are a few pros and cons of outsourcing tax preparation that can help you make informed decisions for your business.
Pros of Tax-Preparation Outsourcing Services
- Provides Security by Using the Latest Technology: Outsourcing companies store your data on highly-secure servers that use advanced encryption technology to protect your sensitive information. By outsourcing tax preparation services, you’ll always have access to the most recent versions of tax software and tools. The software they use can help businesses automate the data collection and tax declaration processes.
- Reduce Errors and Boost Compliance: Your outsourced tax preparation team can ensure that you’re in compliance with the current federal, state, and local tax laws and policies. The tax experts can also help you avoid fines and penalties due to delays and errors that result from improperly calculated taxes. Your outsourced team will always keep you on top of the new tax or accounting requirements and potential changes on the horizon.
- Strategize Tax Planning: Outsourcing your tax preparation services can allow you to calculate payroll taxes and plan for the money you might owe through an efficient tax planning program. With a data-centric approach, they eliminate redundancies and manual processes to increase efficiency through digitization.
- Access to a Higher Level of Expertise: Outsourcing your tax preparation services can allow you to work with financial professionals in related fields. It can provide you with a ready team that can increase or decrease the allocated resources according to your business’ needs.
- Efficient Document Management: Tax preparation outsourcing will ensure that your data is collected, organized and sorted correctly so that when needed, the outsourced team can use it to prepare and file federal, state and local taxes for your business. The team will also provide you with yearly payroll tax reports. They typically deploy a two-step review system to complete tasks with 100 percent accuracy.
- Save Time: You can free up your valuable time to focus on customer acquisition, sales and other vital business matters. You can also save the time spent on determining tax obligations and recruiting tax experts by handing these off to an outsourced expert.
- Reduce Costs: Companies can save money on staff and office supply costs by outsourcing their tax preparation services. Tax outsourcing also allows you to reduce the operational cost of tax preparation and fees for the year-end audit, thus automatically improving the ROI of the company.
Cons of Tax-Preparation Outsourcing Services
- Security and Privacy Concerns: The biggest concern with outsourcing tax preparation involves the security and privacy of crucial data. Even with high-tech cybersecurity, it’s difficult to be sure of personal information security. Therefore, entrepreneurs should read over the security and privacy policies of companies before outsourcing.
- Outsourcing Costs: Although outsourcing tax preparation does save time and money, it still can be more expensive than the price of handling it yourself as the entrepreneur. To make sure you pay only for the amount and level of services you require, you’ll need to perform thorough research on the tax preparation market.
- Missed Learning Opportunity: In addition to the money paid for outsourcing tax services, you could miss out on the chance to learn about new tax laws and deductions, which can prove useful in the future.