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Accounting Best Practices, Fifth Edition by Steven M. Bragg Englewood, Colorado

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13–19. Outsource Tax Form Preparation

For smaller firms, the accurate and timely preparation of tax forms is a monumental pain that frequently results in missed filing dates, incorrect payments, and penalties. The reason is that a smaller organization cannot afford the services of a full-time tax accountant, which means that incoming tax forms are routed to whomever has time to complete them. No one likes to do tax forms and so they end up at the bottom of someone’s work pile, resulting in a last-minute rush to complete them, without much regard to accuracy or filing dates. Larger organizations do not have this problem, since they have specialists on staff who can organize a steady stream of tax work, resulting in accurate tax filings mailed out precisely on time and that are supported by fully documented work papers. Thus, the controller of a small company needs to find a better way to prepare tax forms.

The solution is to outsource the bulk of the tax filings to one or more suppliers, usually with a few tax returns remaining in-house. A common situation is for a company’s audit firm to take over all federal and state income tax returns. These are among the most complex returns to file, and these are precisely the forms that most audit firms specialize in filing. In addition, many companies outsource their payroll so the payroll-processing suppliers will handle all of the tax return information related to payroll. This leaves local returns, which are best kept in-house—these documents ...

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