Taxes and bookkeeping are important aspects of every business. Bookkeeping involves the tracking of invoices and their corresponding payment. Ensuring your business receives on-time and accurate payments keeps your business alive and thriving. Additionally, it is important that your taxes are paid on time and accurately. Any errors in your tax filing may lead to penalties by the Internal Revenue Service (IRS), your state tax authorities, or both. Outsourcing tax services for your small business can help with both tax preparation and bookkeeping.
What is Outsourced Tax Preparation?
Outsourced tax preparation is when your business hires a third party to handle your tax needs, as opposed to hiring an in-house employee to do your business’s taxes or even handling your business’s taxes yourself, as many small business owners are inclined to do. Outsourced tax preparation delegates time-consuming tax preparation activities to a partner that prepares a full range of returns accurately, on time, and on budget.
Why Outsource Tax Preparation?
Outsourcing your tax preparation has numerous benefits. Most notably, outsourcing tax preparation responsibilities frees up your and your employee’s time. Tax preparation can be highly time-consuming. Tax preparation involves activities such as bookkeeping, filing necessary forms, balancing your business’s accounts, staying up to date on relevant tax laws, etc. These tasks can be time-consuming for a tax professional well versed in the tax preparation processes, let alone for a small business owner who is learning on the go.
Further, running a small business requires detailed attention by the business owner. By outsourcing tax preparation responsibilities, small business owners have exponentially more time to focus on managing and growing their business, and often save themselves the headache of learning the intricate tax filing process! Your tax preparer will also tailor your tax services to best meet your business’s needs based on size, business, and other relevant considerations.
Another benefit of outsourcing tax preparation is that you will have a worry-free tax season. When you outsource your tax preparation needs, you have an individual or a team you can rely on to ensure your tax filings are prepared accurately and on time. Additionally, by relying on the expertise of an outsourced tax preparer, you will know they identified the maximum number of deductions available to your business. Your tax preparer will also provide support to your small business during filing season so that you know all of the proper steps have been taken and all necessary filings are submitted on time. And should the unfortunate event of an audit occur, you will have your tax preparer’s advice and guidance throughout the process.
Tax law is ever evolving, which has never been more apparent than in modern times, where we have seen almost yearly updates and temporary modifications to tax laws in response to the COVID-19 pandemic. These changes are often highly technical and unfeasible for a small business owner to stay up to date on amongst their other day-to-day responsibilities. Outsourcing your tax preparation responsibilities also outsources the responsibility of keeping up to date on tax laws. In addition to having that pressure taken off your shoulders as a small business owner, you will know that your business is always in compliance with evolving tax laws because your tax preparation specialist remains abreast of these ever present changes.
Professionals Help you Optimize your Taxes
Mistakes in your taxes can be costly for businesses, especially small businesses. For example, if your business owes otherwise avoidable taxes, your profitable business can unnecessarily end up in the red. An outsourced tax professional can help you avoid such unnecessary negative consequences.
The tax code is cumbersome and riddled with minute details a layperson may overlook or be unaware of. There are multiple types of deductions and other types of advantages small businesses can take advantage of. Having knowledge of these advantages, and taking advantage of them, can save your business up to thousands of dollars. However, if you don’t know of these intricacies, you may pay unnecessary taxes. Outsourcing your tax responsibilities will ensure your business takes advantage of all possible benefits and avoids any avoidable negative consequences.
Did you know small businesses are frequent targets for employee fraud? While compiling business tax returns, an outsourced tax professional will be able to identify where your business is susceptible to internal fraud. Independent tax professionals will provide impartial reports on your finances and offer transparent and accurate data to help protect you and your business.
Additionally, by outsourcing your tax preparation, you receive the peace of mind that your information is secure in the hands of an accounting company or firm. These third-party tax preparation companies utilize highly secured systems that protect against cyber-attacks and hacking. In contrast, small businesses that handle their tax filing internally don’t have the knowledge or technology to prevent cyber phishing or malicious individuals from accessing your sensitive tax information.
In addition to outsourcing the actual tax filing process, outsourcing tax preparation responsibilities may include outsourcing your small business’s bookkeeping. Because bookkeeping is a continuous process throughout the year, this is where most day-to-day time is saved. Outsourcing bookkeeping provides small business owners peace of mind that all their transactions are accurately categorized, and your books are optimized and balanced come tax season.
Additionally, the assistance of an outsourced tax professional in bookkeeping can have benefits for your business going forward. A knowledgeable tax professional who has intimate insight into your business, its cash flow, and business patterns can provide proactive insights and recommendations to help your business grow. For example, if your business is looking to expand, an outsourced tax professional can provide advice on how to grow and avoid unnecessary taxes or take advantage of programs that provide tax cuts, such as relocating to economically depressed areas. Including your third-party tax professional in your future plans can have immense benefits.
Small business owners have enough on their plates in worrying about the day-to-day operation and management of their business. Outsourcing tax preparation responsibilities can have immense benefits for small businesses.