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Start the journey with a well-designed RFP
Tax compliance isn't for the faint of heart these days. Proper execution can directly affect cash flow, the defensibility of tax return positions, risk management, and ultimately the public's perception of your company as a responsible taxpayer. In the face of these concerns, as well as ever-changing tax laws and regulations and shortages of tax talent, the important business of compliance has become increasingly complex and automated.
No wonder that a growing number of global companies each year choose to outsource their tax compliance activities, including U.S. corporate income tax. If you are considering outsourcing, it is critical to prepare for the changes needed to optimize your outsourced tax operating model, including the choice of software and advisors. Outsourced compliance, when done strategically, may offer both quantitative and qualitative benefits, enabling tax departments to focus on planning, risk management, and better reporting.
A well-designed request for proposal (RFP) is key to preparing to outsource. It can help you scope and prioritize many areas of importance unique to your company beyond the tax returns that must be filed and deadlines that must be met. When developing the RFP, you should avoid tunnel vision, i.e., focusing solely on the mechanics of traditional "lift and shift" outsourcing and neglecting other critical elements of your tax operating model. Instead, the RFP should rely on a holistic understanding of your current tax operating model-your data, technology, processes, people, and governance model-as well as a forward-looking vision of where your tax department will be in three to five years. This approach will help you better meet your compliance obligations while supporting your tax department's role as strategic advisor and contributor to the broader enterprise.
Checklist Items
What checklist items can lead to a pitch-perfect RFP? Start with a clear vision of what you want your tax department to be and do, then determine how outsourcing can support that vision. Most companies evaluate various approaches to compliance during this planning process, including transformation of in-house return preparation, collaborative sourcing of return preparation, lift and shift outsourcing, and outsourcing that includes rebadging compliance personnel. It is important to consider all these strategic options, which center on the human element but are all technology-enabled. With the...