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For CPA firms, there is an overbearing responsibility to ensure that financial management and compliance is upheld for clients during tax season, and while some firms rise to the challenge and are quite comfortable dealing with everything tax season has to throw at it, others struggle to manage their workload and may seek professional help from outsourced service providers.
Unfortunately, even if a CPA firm does feel able to deal with the additional and intensified workload during tax season, and chooses not to outsource tax preparation services, the risk of errors is heightened due the pressures of the season, which includes deadlines.
All it takes is one miscalculation, no matter how it came about, to lead to an audit, costly penalties and a reputation damaged beyond repair.
Tax outsourcing is one of the most effective ways of reducing errors, and therefore reducing the risk of an audit, thanks mainly to their specialist tax knowledge.
Keeping pace with all changes to tax laws and regulations, outsourced tax service providers can deal efficiently with tax codes, assuring you and your clients achieve 100% compliance at all times.
But what are the most common audit triggers?
While being up-to-date with tax laws can go a long way to reducing the risk of an IRS audit significantly, there are other triggers that may prompt an audit, such as the following:
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Reported income discrepancies
Occurring when a reported income doesn’t match documentation provided by a third party, such discrepancies can increase the risk of an audit. When you outsource your tax prep requirements, they will use specialist reconciliation tools to make sure that all figures reported are in alignment.
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Excessive deductions
With the help of benchmark analyses to make sure all deductions are well-documented and within reason, outsourced tax prep providers prevent undue attention from the IRS.
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Misclassifications
Using IRS guidelines to classify employees and independent contractors properly, tax experts can avoid misclassification which could lead to an audit.
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Late filings
It’s not unusual for a delayed tax payment or submission to incur penalties and audits, and the use of reminders and automated systems can help guarantee timeliness.
The transformative power of outsourced collaborations for CPA firms
Excelling in tax advisory services and strategic planning, tax outsourcing companies can assist with routine tasks that are time consuming for CPAs, such as reconciliation and data entry, helping them to achieve the following:
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An improvement in client service
With many of their routine, but essential, tasks being professionally taken care of by a third party, CPA firms can shift their focus to the delivery of services to their clients that are highly personalized, and value-driven.
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Expanded offerings
Thanks to outsourcing, overstretched CPA firms can scale up their operations and offer clients a wider spectrum of services, without having to invest in extra in-house staff.
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Upkeep of quality standards
Renowned for their high levels of compliance and accuracy, outsourcing partners use their expertise to help reinforce a CPA firms reputation.
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Mitigating the risk of audits
As mentioned at the top of this article, outsourced tax preparation can mitigate the risk of an IRS audit thanks to their specialist tax knowledge and expertise.
Audits aren’t fun for anyone, and avoiding them should be at the top of every CPA firms agenda. Fortunately, all it takes is partnering with an outsourced tax service provider to significantly reduce the risk of ever being targeted for an audit, and with the many other benefits that outsourcing brings with it, can your CPA firm afford not to outsource its tax requirements?
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