The True Cost of Outsourced Tax Preparation: What to Expect

Taxes can sometimes feel like trying to find your way through a complicated puzzle. In this blog, we’ll explore the outsourced tax preparation cost in 2024 and what benefits it will bring. As the year 2024 goes on, many people and companies are looking for better ways to handle their money.

Outsourcing tax preparation has become a reliable way to ease the process and make sure everything is done correctly. Whether you possess a small business or serve as a taxpayer on your own, knowing about these costs can help you make better choices and give you a bit more peace of mind.

What is tax preparation?

Tax preparation covers all the services such as preparing, filling and assisting in filling tax forms and other related services. These services are offered by the enrolled agent, CPA and tax attorney in the USA.

Why there arises a need to outsource tax preparation?

Most business firms are outsourcing tax preparation services to developing countries because of low labour costs and efficient work performance in these countries.

The cost of outsourcing is less than the cost of tax preparation in developed countries because of cheap and abundant labour. This is the prime reason why most firms are outsourcing tax preparation services to reduce their costs and gain more profit.

Tax preparation services

-Business Tax Preparation Services

-Tax Filing Services

–Tax and Regulatory Services

–Sales Tax Return Services

–Federal Tax Services

–Tax Consulting Services

-Individuals – Form 1040

-Fiduciaries

-Corporation – Form 1120

-Non-profit, estates & gift tax

-Partnerships – Form 1065

Benefits of outsourced tax preparation

-Reduction in cost and increase in profit by outsourcing to developing countries as it facilitates the advantage of low-cost labour and experienced professionals

-Can take advantage of inexpensive labour and efficient work performance that are unavailable in developed nations due to the fact that professionals in developed nations charge more for the same work that professionals in developing nations can do for less money and in less time.

-Can take advantage of turnaround time due to differences in the time zone for example India is 9 hr 30 min ahead of the USA so work can be completed in less time by outsourcing to Indian clients.

-Can take benefit of the latest technology as now the developing nations are trying different ways to bring out most advanced technology which inturn helps them to compete in global markets.

-By outsourcing less prioritised work outsourcing firms can focus on more important tasks. This will help them to move on to the prioritised work.

-Can take advantage of the expertise and knowledge of professionals around the world

Outsourced tax preparation cost

The average cost of outsourcing can cost between $500 to $5000 per month. There are a wide variety of factors that affects the cost of outsourcing such as

-The greater the revenue of a business, the greater the amount of labor that must be performed, and thus the greater the cost. Price is also dependent on the nature of work outsourced. If a job requires greater talent and resources, the price will be higher.

-The firm’s size and reputation are considered when outsourcing employment. A firm with a strong reputation and a large clientele will charge more for its services than one with fewer customers.

-Country in which work is outsourced. If the work is outsourced to a developing country which has an abundance of labour then the cost will be less as opposed to outsourcing to developed countries

-Employees in the firm to which work is outsourced. If a firm has more employees then work can be completed in less time then the cost would be less.

-Type of services outsourced. If work involves planning and consultancy then the cost would be very high as opposed to costs involved in performing routine works like filling returns etc

Things to keep in mind while outsourcing

-Find a firm with fair rates as compared to work. Compare rates with two or more firms then decide accordingly

-Find a business with experienced and competent professionals. If a firm has experienced and competent professionals then work would be accurate and will be completed in less time.

-As outsourcing involves the allocation of data to clients so find a firm that can keep your data secure. Choose firms that have good and secure systems which can keep your data safe.

Big companies that benefit from outsourcing

1-Google

As one of the top companies famed for taking care of its in-house culture and employees, it might look like a bit of a mistake to list Google here.

The reality, though, is that the tech giant, headquartered in Mountain View, California, has been working with outsourced staff across multiple types of roles for years, with contractors even outnumbering the actual number of employees they have.

Whether it’s IT specialists, developers, or numerous other roles, Google already had 120,000+ outsourced employees by 2019. Google is a strong implementer of outsourced work to handle the many projects they continuously deploy and work on.

One example of where they made a big outsourcing decision is when they decided to outsource phone and email support for Google Ads back in 2011. Google Ads is their biggest earner, so getting it right was important: outsourcing provided the right solution to this and helped them continue their growth by focusing their resources on other areas of the business.

2-Wells Fargo

As a multinational financial and Fortune 500 company, Wells Fargo has offices in 31 countries providing banking, investment, and mortgage products and services. However, it also gets work done through business process outsourcing.

Outsourced companies in the Philippines and India allow Wells Fargo to focus on developing innovative technologies and solutions. Some of the roles the company outsources are customer service representatives, payroll consultants and analysts, process engineers, fraud specialists, and financial accountants.

What to look for in a company before outsourcing?

-Should be IFRS compliant

-Financial and personal data of clients is secure with them

-See customer reviews

-Prices must be flexible

FAQ‘s

1. Which country is best in terms of outsourcing work?

-India is a top outsourcing destination across the world due to its cheap labour and competent professionals.

2. Does outsourcing tax preparation works only for large firms?

-No even small and mid-size firms can outsource their routine work and can focus on more important tasks and can benefit from outsourcing.

3. How outsourced tax preparation work?

-Outsourcing entity will provide the client’s necessary personal and financial information to the outsourcing service provider then the service provider will use that information to prepare returns and share the same with the outsourcing entity.

Also, read:

• The Outstanding Benefits of Outsourcing Bookkeeping Services
• What is Customer Reconciliation?