Payroll

Why You Need to Consider Outsourcing in 2020

Outsourcing is a growing trend with seemingly countless benefits. Typically, responsibilities such as accounting and financial decision-making, marketing, and programming will be among the first that businesses make the decision to outsource. By delegating these tasks to experts, your business will be able to not only save money but also save time that can be used to advance other business objectives.Jan 16th 2020

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With the beginning of a new year, countless businesses are reevaluating their strategies and their general operational approach. While some of these businesses will elect to make some minor tweaks and adjustments in-house, others will decide to outsource many of their operations and turn to specialized experts.

Outsourcing is a growing trend with seemingly countless benefits. Typically, responsibilities such as accounting and financial decision-making, marketing, and programming will be among the first that businesses make the decision to outsource. By delegating these tasks to experts, your business will be able to not only save money but also save time that can be used to advance other business objectives.

If your business has never outsourced work before, you likely have a lot of questions. How much does outsourcing typically cost? What are the primary benefits of outsourcing? How can my business find an outsourcing partner that can maximize our organization’s full potential?

In this article, we will discuss the most important things for you to know about outsourcing in 2020. By understanding why businesses, of all varieties, make this crucial decision each year, you’ll be able to generate a reliable plan for your business.

The Benefits of Outsourcing

Businesses outsource in order to save money. In fact, according to recent surveys, 59 percent of businesses choose to outsource in order to reduce their expenses. There are quite a few reasons why outsourcing certain business functions can be cost-effective. Not only will your outsourcing partner operate via an economy of scale (allowing you to purchase goods and services at a discount), but they will also have the infrastructure in place in order to help your business operate more efficiently. Furthermore, your business may find itself in a situation where it needs a “fraction” of a specific service without making a full commitment. In response, fractional CFOs and other services have become extremely popular in the digital era.

Businesses also choose to outsource in order to gain access to experts. Regardless of how smart or well-versed a business owner might be, it is incredibly unlikely that they know how to do everything as well as a certified expert. In fact, according to Deloitte, two of the most common reasons for outsourcing include improved performance (62 percent) and reduced errors (53 percent). Because only a fraction of business owners have accounting or financial experience, these functions are often among the first to be outsourced.

Furthermore, businesses look to outsource in order to access new systems, structures and technologies. The aforementioned survey revealed that 51 percent of businesses choose to outsource in order to access new technologies. In the world of digital accounting specifically, 93 percent of businesses hope to incorporate cloud technologies into their accounting practices. By working with the cloud and various other eCommerce tools, businesses can operate more effectively and access crucial decision-making information from anywhere in the world.

Commonly Outsourced Responsibilities

Accounting and finance are often among the first set of duties to be outsourced. These tasks, which require considerable attention to detail and expertise, can help businesses protect themselves from financial and legal hazards while also finding creative methods to improve their bottom line. An outsourced accountant can help your business organize (or reorganize) your books, prepare its taxes, generate long-term financial projections, establish an eCommerce platform and much more.

A 2018 Client Accounting Services (CAS) Survey revealed that about 80 percent of all businesses would refer their outsourced accountant to another business. However, accounting isn’t the only field where businesses are happy with their outsourcing partners. Legal, software development, marketing, and payment processing are all frequently outsourced as well. Even many of today’s Fortune 500 companies will make the decision to outsource.

Making the Decision to Outsource

Naturally, whether your business should make the decision to outsource will depend on many different factors. When deciding if outsourcing is appropriate for your business, you will need to do so using a comprehensive framework that accounts for opportunity costs.

Suppose that your business’ accounting responsibilities require 100 hours of work per month. If you consider each hour of work to be worth $40 (or whatever number you deem fit), this means your business’ total accounting costs will amount to $4,000 per month ($48,000 per year). However, if your business could generate $50 worth of revenue for every operational hour that it gains, this means you are missing out on $5,000 per month ($60,000 per year) in positive cash flows.

In this situation, when all else is equal, making the decision to outsource would initially have a $12,000 annual impact on your bottom line. When factors such as added tax deductions and better financial practices are accounted for, the amount your business can save with an outsourced accountant will be even greater.

While this hypothetical situation is obviously simplified, it demonstrates that the financial benefits of outsourcing may be even greater than you initially assumed. Your business, regardless of its size, only has a finite number of resources—it will be in your best interest to use these resources as efficiently as you possibly can.

Finding the Perfect Outsourcing Partner

With so many outsourcing options available to choose from, it can be difficult to know where to begin your search. Fortunately, the digital era makes it easy to find outsourced accountants, fractional CFOs and whatever outsourced help you might need.

When comparing potential partners, be sure to conduct a preliminary interview. Ask questions about the firm’s qualifications, experiences and other important details. Identify which services the firm offers and see if there are discounts available for bundling multiple services into a single (highly personalized) package. New technology makes it easy to access countless different outsourced firms, which may be located in different states or even in different countries.

2020 is the perfect year for your business to outsource its accounting needs or outsource various other responsibilities. Outsourcing can help your business gain access to expertise, use its resources more efficiently and, ultimately, improve its bottom line. Whether you are looking for a digital accountant or anyone else, you may want to consider outsourcing and gain access to these desirable benefits.

reprinted with permission from: https://www.accountingweb.com/practice/practice-excellence/why-you-need-to-consider-outsourcing-in-2020

Improved Tax Withholding Estimator helps workers target the refund they want; shows how to fill out new 2020 W-4

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WASHINGTON — The Internal Revenue Service has launched a new and improved Tax Withholding Estimator, designed to help workers target the refund they want by having the right amount of federal income tax taken out of their pay.

The Tax Withholding Estimator, now available on IRS.gov, incorporates the changes from the redesigned Form W-4, Employee’s Withholding Certificate, that employees can fill out and give to their employers this year.

The IRS urges everyone to see if they need to adjust their withholding by using the Tax Withholding Estimator to perform a Paycheck Checkup. If an adjustment is needed, the Tax Withholding Estimator gives specific recommendations on how to fill out their employer’s online Form W-4 or provides the PDF form with key parts filled out.

To help workers more effectively adjust their withholding, the improved Tax Withholding Estimator features a customized refund slider that allows users to choose the refund amount they prefer from a range of different refund amounts. The exact refund range shown is customized based on the tax information entered by that user.

Based on the refund amount selected, the Tax Withholding Estimator will give the worker specific recommendations on how to fill out their W-4. This new feature allows users who seek either larger refunds at the end of the year or more money on their paychecks throughout the year to have just the right amount withheld to meet their preference.

The new Tax Withholding Estimator also features several other enhancements, including one allowing anyone who expects to receive a bonus to indicate whether tax will be withheld. In addition, improvements added last summer continue to be available, including mobile-friendly design, handling of pension income, Social Security benefits and self-employment tax.

Starting in 2020, income tax withholding is no longer based on an employee’s marital status and withholding allowances, tied to the value of the personal exemption. Instead, income tax withholding is generally based on the worker’s expected filing status and standard deduction for the year. In addition, workers can choose to have itemized deductions, the Child Tax Credit and other tax benefits reflected in their withholding for the year.

It is important for people with more than one job at a time (including families in which both spouses work) to adjust their withholding to avoid having too little withheld. Using the Tax Withholding Estimator is the most accurate way to do this. As in the past, employees can also choose to have an employer withhold an additional flat-dollar amount each pay period to cover, for example, income they receive from the gig economy, self-employment, or other sources that is not subject to withholding.

For more information about the updated Tax Withholding Estimator and the redesigned 2020 Form W-4, visit IRS.gov.

Interest rates remain the same for the first quarter of 2020

WASHINGTON —The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2020.  The rates will be:  

  • 5% for overpayments [4% in the case of a corporation];
  • 2.5% for the portion of a corporate overpayment exceeding $10,000;
  • 5% for underpayments; and
  • 7% for large corporate underpayments. 

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. 

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during Oct. 2019, to take effect Nov. 1, 2019, based on daily compounding.

Revenue Ruling 2019-28, announcing the rates of interest, is attached and will appear in Internal Revenue Bulletin 2019-52, dated Dec. 23, 2019.

Get ready to take the guesswork out of paycheck withholding

The tax filing season is quickly approaching. With that in mind, taxpayers should remember there’s still time to make an estimated or additional tax payment to ensure their tax withholding is still accurate.

Those who need to make an estimated tax payment for 2019 should remember that the fourth quarter payment is due Wednesday, January 15, 2020.

These taxpayers will want to check to see if their 2019 federal income tax withholding will unexpectedly fall short of their tax liability for the year. They can check this by using the Tax Withholding Estimator on IRS.gov.

All taxpayers can use the results from the Tax Withholding Estimator to determine if they should:

This tool helps employees avoid having too much or too little tax withheld from their wages. It also helps those working for themselves make accurate estimated tax payments. Having too little withheld can result in an unexpected tax bill or even a penalty at tax time in 2020. Having too much withheld results in less money in their pocket.

The Tax Withholding Estimator asks taxpayers to estimate:

  • Their 2019 income.
  • The number of children to be claimed for the Child Tax Credit and Earned Income Tax Credit.
  • Other items that will affect their 2019 taxes.

The IRS Withholding Estimator does not ask for personally-identifiable information, such as a name, Social Security number, address and bank account numbers. The IRS doesn’t save or record the information entered in the Estimator.

Before using the Tax Withholding Estimator, taxpayers should gather their most recent pay stubs and income documents from all sources. They should gather documents related to pensions, annuities, Social Security benefits and self-employment income. They should also have a copy of their 2018 federal tax return. This will help estimate 2019 income and answer other questions asked during the process.

If a taxpayer follows the recommendations at the end of the Tax Withholding Estimator and changes their withholding for 2019, they should recheck their withholding at the start of 2020. A withholding change made in 2019 may have a different full-year impact in 2020. So, if a taxpayer does not file a new Form W-4 for 2020, their withholding might be higher or lower than they intend.

Taxpayers should remember that the Tax Withholding Estimator’s results will only be as accurate as the information provided. People with more complex tax situations should use the instructions in Publication 505, Tax Withholding and Estimated Tax . This includes taxpayers who owe alternative minimum tax or certain other taxes, and people with long-term capital gains or qualified dividends.

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IRS recommends business owners e-file payroll tax returns

WASHINGTON — With the Oct. 31 quarterly payroll tax return due date just around the corner, the Internal Revenue Service today urged business owners to take advantage of the speed and

IRS Forms 940, 941, 943, 944 or 945 are used to report employment tax information. The IRS recommends electronic filing, or e-filing, of these returns.

E-filing saves taxpayers time by performing calculations and populating forms and schedules using a step-by-step interview process. Once submitted, the information is quickly available to the IRS thus reducing processing time.

E-filing is the most accurate method to file returns. Those who e-file receive missing information alerts. Electronically filed returns have fewer errors, which reduces a taxpayer’s chance of receiving an IRS notice.

The IRS takes safeguarding personal information seriously and e-filing security is a top priority at the agency. E-file security standards ensure tax information is protected from security breaches. The IRS requires all authorized IRS e-file providers to ensure only authorized users have access to secure information.

The IRS acknowledges receipt of e-filed returns within 24 hours. The agency retains the information on the tax return, making it accessible to the filer or tax professional around the clock. Unlike filing a return on paper, e-filing assures the filer that the tax return is with the IRS and not misplaced or lost in the mail.

There are two options for electronically filing payroll tax returns: 

Only the business owner can apply for an online signature PIN. Third parties, such as attorneys, CPAs, tax return preparers or other tax professionals can’t request a PIN on behalf of the business, nor can they use the PIN to sign returns on behalf of their clients.

For more information on electronic filing of payroll tax returns, see the E-File Employment Tax Forms Page.

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