Why More U.S. Accounting Firms Are Rethinking Their Tax Preparation Workflow

The types of returns assigned externally depend on the firm's requirements and the provider's experience.

Many U.S. accounting firms consider outsourcing support for the following tax forms:

Form 1040: Individual income tax return preparation involving wages, investment income, deductions, credits, and other relevant financial information.

Form 1065: Partnership return preparation support, including income reporting and supporting schedules.

Form 1120: Corporate income tax return preparation for C corporations.

Form 1120-S: S corporation tax return preparation, including relevant financial information and supporting schedules.

Form 1041: Trust and estate income tax return preparation support.

Apart from return preparation, firms may also delegate workpaper preparation, bookkeeping assistance, account reconciliation, and tax document organization.

The scope should be agreed upon before work begins so that both teams understand their respective responsibilities.

What Should Firms Know Before Outsourcing Tax Work?

Although outsourcing can offer operational advantages, it requires proper planning.

The first step is deciding which activities should be delegated and which should remain with the internal team.

For example, a firm may be comfortable outsourcing routine preparation work but prefer to retain responsibility for client consultations, complex tax planning, and final return approval.

This distinction helps prevent confusion and establishes clear accountability.

Another important consideration is communication. External teams need accurate instructions, complete documentation, and access to the information required for their assigned work.

Accounting firms should also establish turnaround expectations and procedures for handling incomplete documents or unusual tax situations.

Without these arrangements, outsourcing can create additional coordination work instead of reducing it.

Data Protection and Confidentiality Cannot Be Overlooked

Tax records contain sensitive information that must be handled carefully.

Client documents may include Social Security numbers, financial statements, bank information, investment details, and business records.

Before selecting a provider, accounting firms should examine its information security practices.

Some essential considerations include:

• Secure document-sharing arrangements.
• Restricted access to confidential information.
• Employee confidentiality agreements.
• Appropriate data storage and retention policies.
• Documented procedures for handling security incidents.
• Clear responsibilities for protecting client information.

U.S. tax professionals should also understand their legal obligations when sharing tax return information with external service providers.