Taxation is a field of the economy that impacts every entity, whether human or an organization, of a country. But don’t be deluded by its common use tale; it is not such a task to be understood easily by a layman. Although filing a tax return is mandated for all legal entities, professional competence is needed to compile financial data as required by the taxation authorities. There is a dearth of such professionals in many developed countries, while the pressure for filing is high due to reliance on CPA firms for accounting and reporting
Outsourcing Tax Preparation
Developing countries like India have a large professional population who are labor-intensive in their work and can leverage indigenous technological tools to benefit from economies of scale. Many technical services are being outsourced from India, which are economical for entities in developed countries due to the availability of cheap labor in India. The professional competence of people in India is also high given the wide array of work they are exposed to and the low level of automation, making operational-level manual intervention indispensable.
Strategize Tax Season Management
Taxation authorities define the financial year in different countries that ascertain the timelines for tax calculations and filings. These are the times when the tax burden is enormous, and so is the availability of people to perform these duties. CPA firms are already aware of the peak rush as it is a recurring thing, so they can steam off some pressure if they plan the busy seasons well.
- The firms should identify the tax work beforehand and prepare a calendar to assist pre-emptive work allocation. This will give them an idea about the mismatch between work and in-house handling capacity.
- Planning will also allow firms to focus on their mainstream work of providing consultations and specialized accounting while reaping benefits from the work outsourced, with little or no supervision.
- Tax filing is a standard activity guided by some laws and regulations by the relevant department. It is routine work for tax professionals and does not require varied information. The standard set of documents required for the job makes it viable for outsourcing.
- CPA firms looking to outsource tax preparation from India need to be vigilant about the organization’s reputation before hiring them for services.
- The most important thing to look for in a tax preparation service provider is compliance or membership with world-renowned associations of CA such as ACCA, AICPA, IMA, CMA, etc. These provide the most-needed authenticity to the outsourcing firm. The Indian curriculum is based on international standards, making it a cakewalk for Indian tax managers to prepare filings for foreigners.
- CPA firms should also talk to their peers for references. People in the same field are of great help as they know about the ins and outs of the ecosystem.
- Interviewing people before hiring them is also a good practice to judge people’s knowledge and basic understanding. They should be well aware of compliance needed to be followed for different countries like the GDPR in the EU.
- Being sure about the technologies in use and the firm’s commitment to performing with tight deadlines will be the brownie point.
Risk Management for Offshore Tax Preparation
There is a high level of cyber security risk involved in sharing sensitive financial information on the internet. The hacking of personal data is quite widespread and even easier than it used to be. But there can be some checks that will dispel the risk to a great extent. Using private file-sharing services should be the choice over public cloud servers. Some organizations also have an in-house DBMS portal through which access to information can be shared to the extent required.
The ethical aspects of outsourcing work require the accountant firm to ask for the client’s consent before handing over the data to someone else. CPA firms can also do this step in advance when they prepare the annual calendar so that the clients willingly giving consent can be enlisted for outsourcing.
Yet another problematic factor is the quality assurance and answerability for the work done. This can be ascertained by contracting with the overseas firm clarifying the scope of work and associated liabilities.
Benefits of Outsourcing Tax Preparation
Business process outsourcing is trending in the modern world due to businesses focusing on core competencies and relying on experts for other activities. The scarcity of cheap labor in developed nations due to high minimum wages results from high living costs. This is what leads to businesses looking at developing countries with not so stringent labor laws and lower living costs to provide labor for their work. It seems unfair but is benefitting both the countries having mutual needs fulfilled by each other.
India has a growing technological start-up ecosystem, making it a good service provider. Businesses in India have access to high-speed internet, reliable telecommunication in established cities, technical know-how to use the latest software, and good communication skills to provide remote technical support. Check this post out to know more about outsourcing your tax preparations to India.
Outsourcing certain aspects of work in peak seasons can bring much-needed support to CPA firms. They need to plan the work involving effective communication with the offshore firm to leave the scope for error and delays. The differences in time zones can be smoothly managed by allotting work beforehand as per schedule. The time difference can be leveraged to keep the work on 24*7.
Long explanation, in short, tax preparation outsourcing can be beneficial to accounting firms using a reduced cost, better time management with improved work quality, and more experience from veterans. It is a win-win situation for businesses everywhere.