Many CPA and accounting firms in the USA have now decided to outsource tax prep to cope with busy times, staff shortages, and the complexity of tax rules among other reasons. Outsourcing gives the benefit of additional manpower without the expenses and risks associated with hiring full-time employees.
At the present time, there are two popular models: the dedicated team model and the on-demand model. The selection of one over the other influences your costs, workflow, and clientele experience, thus it is vital to know the working of each one.
What Are Outsourced Tax Preparation Services?
Outsourced tax preparation services mean sending your tax return work to a specialist external team instead of doing everything in-house. These teams work as an extension of your firm and follow your processes and quality standards.
Typical services include:
- Preparation of individual, corporate, partnership, and other returns
- Data entry and workpaper organization
- Applying standard tax rules and checks
- Support for e-filing and documentation
Most providers use secure portals and standard templates to manage documents and communication. This helps protect client data and keeps workflows smooth.
What is the Dedicated Tax Outsourcing Team Model?
To understand the comparison, start with how a dedicated tax outsourcing team operates. In this model, your outsourcing provider assigns a specific team to work only for your firm during the agreed period.
You usually pay for a fixed capacity, such as:
- FTEs in a specific amount
- A specific number of hours, per month
- A constant seasonal block (e.g., the whole tax season)
In due course, this group becomes familiar with your tools, your reviewing approach, and your important client categories.
Daily Operations of a Dedicated Team
This is what the model normally looks like in practice:
- The same outsourced staff handle your files every week
- The team may use your email domain or your project management system
- You train them once on your processes and expectations
- You hold regular review meetings to check performance and fix issues
This setup makes it easier to treat outsourced colleagues like part of your internal tax department.
What is the On-Demand Tax Outsourcing Model?
Once the dedicated model is clear, it is easier to compare it with on-demand tax outsourcing. In the on-demand model, you send work whenever you need help and pay per job instead of paying for a fixed team.
You do not reserve specific people. Instead, the provider uses a shared pool of tax preparers and reviewers to process your returns.
Common features of this model include:
- No long-term staffing commitment
- Pricing per return, per form, or per hour
- Standard turnaround times for different job types
- Ability to send work only in busy weeks or months
This makes on-demand outsourcing a flexible, low-commitment option.
Flexible Tax Outsourcing and Hybrid Models
Between the two models lies flexible tax outsourcing, which combines elements from both. A hybrid approach might look like this:
- A small dedicated core team that works with you all year
- Extra on-demand capacity during peak tax season
- Variable usage based on your pipeline and deadlines
This structure helps firms avoid overpaying for idle capacity while still enjoying the familiarity and stability of a dedicated group.
Cost Comparison: Dedicated vs On-Demand
Cost is often the first factor firms review when choosing between models. The cost picture is different for each.
Dedicated team highlights:
- Fixed monthly or seasonal cost
- Lower cost per return if volume is high and steady
- Better value if the team is kept busy most of the time
On-demand model highlights:
- Pay only when you send work
- No long-term fixed cost
- May have slightly higher per-return prices but lower total spend if volume is low or irregular
If your firm has consistent, high volumes, a dedicated team can bring down the effective cost per return over time. If your workload is small or unpredictable, on-demand is often cheaper overall.
Control, Quality, and Consistency
Money is important, but control and quality matter just as much. The two models differ in how much control you have over who works on your returns and how they follow your processes.
With a dedicated team, you get:
- The same people working on your files
- Deep knowledge of your templates, checklists, and review style
- Easier implementation of firm-specific quality rules
With on-demand, you rely more on the provider’s standard processes and internal quality checks. You may not know exactly which preparers are on each file, but the provider manages training and review on their side.
Pros of a Dedicated Team for Quality
A dedicated team supports consistent quality because:
- Team members get used to your recurring clients and typical issues
- They understand your risk appetite and how you want notes documented
- You can build custom SOPs that the team uses daily
This reduces back-and-forth, lowers rework, and shortens review time for partners and managers.
Pros of On-Demand for Quality and Flexibility
On-demand outsourcing can still deliver strong quality, especially if the provider has:
- Solid training and review processes
- Standardized templates and workpapers
- Clear service-level agreements (SLAs) for accuracy and turnaround
You may need to provide more detailed instructions and sample files at the start, but once those are set, the provider can apply them across different preparers.
Scalability and Busy Season Coverage
One major reason firms outsource is to handle busy seasons without burning out their team. Both models help with this but in different ways.
Dedicated teams and busy season:
- Offer stable extra capacity you can count on
- Work closely with your in-house staff every day
- Require planning in advance to make sure the team is large enough
On-demand and busy season:
- Let you send large chunks of work as soon as returns come in
- Can scale up quickly if the provider has available capacity
- May require early booking or planning during peak weeks to secure turnaround times
If you know your busy-season volume in advance, a dedicated team gives a steady base. If volumes bounce around or are hard to predict, on-demand may be easier to manage.
Data Security and Compliance
Any decision about outsourcing must consider security and compliance. Both models can be safe if the provider has strong measures in place.
Key points to check with any provider:
- Use of secure portals and encrypted data transfer
- Access controls and role-based permissions
- Data storage locations and compliance with relevant regulations
- Certifications or third-party audits
With a dedicated team, you may feel more comfortable because the same people access your systems regularly. With on-demand, strong central security controls and audit trails are key.
When Should CPA Firms Choose On-Demand Outsourcing?
The question comes up, when should firms choose on-demand outsourcing? This comes up often for smaller or growing firms. On-demand is usually a good fit if:
- Your return volumes vary a lot month to month or year to year
- You are just starting with outsourcing and want to test the waters
- You need help only at certain times, like busy season or sudden staff gaps
- You prefer no fixed monthly fees and want to pay only when work is sent
This model lets you try outsourcing with low risk and scale up or down freely.
When Should Firms Choose a Dedicated Outsourcing Team?
A dedicated tax outsourcing team is usually better for firms with:
- High, stable volumes of tax work
- Clear long-term growth plans for their tax practice
- Partners who want more control and closer integration
Situations where a dedicated team works well include:
- Mid-sized or large CPA firms with hundreds or thousands of recurring returns
- Firms that want the same offshore or external staff handling their key clients each year
- Practices where process fine-tuning and long-term efficiency matter a lot
Over time, a dedicated team can become a true extension of your internal staff.
How Flexible Tax Outsourcing Fits In
Flexible tax outsourcing blends both models to give firms more options. A hybrid setup might include:
- For core clients, a small, dedicated team available year-round
- New clients and seasonal spikes need support on-demand
- The option to change the mixture every year depending on the growth and client requirements
This allows you to cope with the risks of too much fixed cost or too much unpredictability. It is particularly beneficial for firms that are expanding or trying out different markets.
The selection between a dedicated outsourced tax prep team and an on-demand model is not a one-size-fits-all solution. It varies with your volume, predictability, budget, and the level of control you desire over processes and people as well.
A dedicated team is ideal for companies that process large, consistent volumes of tax and require seamless integration and uniformity. On the other hand, outsourcing on-demand is more suitable for companies that appreciate the flexibility, pay-as-you-go pricing, and low entry requirements. A strict hybrid model that incorporates both methods would be the best way to meet the needs of many CPA and accounting firms in terms of costs, control, and scalability.
Connect with our experts at The Fino Partners to learn more.
