I recently took my Volvo to a general mechanic thinking I might get a better deal, he said, “Yes, I can fix it but you are going to have to pay for the time it takes me to research and learn how to fix it. So, you are much better off taking it to Volvo, where that is all they do.”
Seems like a pretty good life lesson here, and one that I actually promote. It’s the single-focus of specialists that creates value, in both cost and quality. In the business world we run into this situation when companies are considering implementing complicated tax credits and incentive programs, namely the R&D tax credit, to be completed by the in-house tax department. It’s not a bad thought for trying to save costs, but in reality, with the changes in laws and regulations, the knowledge and experience of audit procedures and the use of technology to power the process, there are major considerations in this decision. In addition, let’s not forget about the opportunity cost of your team members.
So, let’s take a closer look at some of the reasons to use an outsourced tax expert. Here are a few points to consider when making this decision.1. Updates in Law and Regulations
There is no doubt that changes happen fast, and to stay on top of some of these very arcane rules can be very difficult. For example, the IRS directives that provide guidance on documentation and deliverables, and something called nexus, for substantiating the research credit are two complex items that come to mind. It’s difficult to know all of these changes. The change in the controlled group allocation might be applicable? Who knows? How many court cases can your in-house team read in order to stay abreast of the research credit landscape? An outsourced tax expert will dedicate the time and resources for its professionals to tackle these technical issues for you. This is their primary focus.
2. Audit Procedures
Experience is key. Outside technical tax specialists will see multiples of audits, many of these audits will be in the same industry. This is valuable insight and provides the know-how to achieve the best results and to gain the understanding of what positions are strong and low risk, and what positions might be seen as high risk. In addition to industry knowledge, more experience with the process and procedures of the audit process will also help to ensure a favorable outcome. The opening of an audit with the IRS can be described as opening the hood of the Volvo. The more you have seen, the better off you are.
3. Technology
To develop a technology solution for specialty credits and incentives in-house is usually not an investment choice by most companies. It just doesn’t make economic sense to spend the resources on it. But, it’s in an outside consultant’s best interest to streamline the process since it serves a single-focus, business service. Not that all consultants will reinvest money into a technology solution to power the process, but the ones that are good, will. Be sure to understand the process of your outside partners.
4. Opportunity Costs
Don’t forget to calculate the opportunity costs of your team members! The time spent on something else, is time not spent on the job at hand. The time it would take to accurately learn and execute many credits and incentives programs, could consume valuable personnel time. Choosing an outsourced tax consultant with the process and templates already dialed-in will allow minimal disruption to your team members across all departments, including the coveted engineering group. Let the outside specialist do the heavy lifting, while your team continues to focus on the bottom line.
I once heard that life has become a world of specialties. The single-focus by specialists, in conjunction with working together, is what creates the value to us all. With all of the changes in law and regulations, the rapidly changing technology landscape and the limited time that personnel have to complete their work, outsourcing is the answer. Don’t let the word outsourcing deter you, venture out and see what the experts have to offer.
For more information regarding the R&D tax credit or working with an outsourced tax expert, download your complimentary, educational guide below.