Tax Software in the Cloud Is Only Half the IT Strategy

Moving tax software to the cloud can solve several operational challenges for accounting and tax firms. It enables remote access, reduces dependence on local infrastructure, simplifies scaling, and helps firms maintain application availability during demanding periods like tax season.

But hosting tax software is only one part of the technology environment a tax firm needs to manage.

During tax season, firms are not just concerned about whether Drake, Lacerte, UltraTax, ProSeries, or other tax applications are accessible. They must also protect sensitive client information, secure employee devices, manage user permissions, maintain backups, prepare for disruptions, meet compliance requirements, support employees, and ensure that different business applications work together.

This changes the question firms should ask when evaluating cloud hosting.

Instead of asking only, “Who can host our tax software?”, firms should also ask:

“Who can help us manage the broader IT environment supporting our tax operations?”

Some providers specialize primarily in cloud infrastructure and application hosting. Others combine hosting with managed IT, cybersecurity, backup, disaster recovery, compliance support, and technology consulting.

For a tax firm, working with a provider that can support these requirements together can simplify technology management, reduce vendor fragmentation, and create a more coordinated IT strategy.

Here are the areas firms should evaluate beyond tax software hosting.

1. Focus on Security Posture

There are various cloud service providers in the market with diverse offerings. However, not all deploy the same level of data security. Businesses with budget constraints invariably choose a public cloud that deprioritizes data protection. 

Moreover, even hyperscalers such as AWS and Google Cloud Platform (GCP) use a shared responsibility model in which only some aspects of data protection fall under their purview. 

For instance, AWS’s shared responsibility model clearly states that it is responsible for the infrastructure, including hardware, software, and networking. The customer, by contrast, is responsible for managing the guest OS, security group firewall configuration, and more. 

Therefore, as an essential part of their IT strategy, firms that host their tax software in the cloud must deploy stringent internal controls without relying solely on the cloud provider. The tax firm must have a well-defined hierarchy, with each person clearly aware of their roles and responsibilities. 

Admins must implement Identity and Access Management (IAM) policies to restrict and grant access to files based on the defined roles. The file permissions (access, edit, delete, move, etc.) must also be set up accordingly. Tax firms must also define a clear escalation matrix and protocols for data breaches. Furthermore, conduct regular security audits to ensure a robust security posture with no loopholes. Audits also help you keep your security posture aligned with the evolving threat landscape.   

However, if you don’t want to spend precious funds and resources maintaining such a robust security posture, the wisest course is to outsource data security to a managed security services provider (MSSP). 

An MSSP offers comprehensive protection across cloud, email, browser, in-house IT, DDoS, ransomware, network, applications, and endpoints. In hybrid or multi-cloud environments, MSSPs deploy integrated protocols, tools, and procedures to manage them effectively. They also monitor the entire network 24/7 for anomalies and suspicious behavior. 

By choosing an MSSP, you can avoid significant capital investment in security tools and infrastructure. Moreover, it reduces in-house dependencies for managing IT security.  

2. Consulting Partnership

When you choose a cloud hosting company, don’t think of it only as a service provider. Rather, they must be a long-term strategic partner in your growth journey. 

Beyond consulting you on optimal resource management, choose a provider that helps you forecast requirements and develop IT plans to achieve future goals. Cloud hosting providers must ensure cloud infrastructure is part of the IT infrastructure, not an isolated service. If firms opt for a hybrid cloud environment, they must test the systems to ensure seamless integration. They must also proactively provide technology recommendations to improve IT efficiency and offer premium support during peak periods like tax season.           

3. Resource Management

Technology requirements for a tax firm are rarely consistent throughout the year. During tax season, firms may experience significant increases in employees, workloads, application usage, data processing, and client activity.

Cloud hosting provides the flexibility to scale resources, but scalability still requires planning.

Too few resources can slow applications, degrade the user experience, or destabilize the system. Excessive resources, on the other hand, can increase infrastructure costs without providing meaningful performance improvements.

A provider that understands both hosting infrastructure and the firm’s broader IT environment can help forecast demand before tax season rather than reacting to performance issues after they occur.

4. Backup Management

Most cloud providers offer data backup services, either as an add-on or included in the pricing plan. However, using the same provider for backups means your data is stored under similar security protocols and infrastructure. 

Although top cloud providers use robust security protocols for backups, tax firms handle highly confidential data they would not want to share with the provider. They also may not want to put all their eggs in one basket, i.e., store all data on a single cloud platform. 

So, you must take a local backup to add data protection. If deploying a dedicated on-premises backup system is financially unfeasible, you can at least back up critical data. 

Another option is to opt for a different third-party provider that offers Backup-as-a-Service (BaaS). This way, if your data is lost, compromised, or corrupted at one source, data redundancy makes recovery easy. 

5. BCDR

For any tax firm, a robust Business Continuity and Disaster Recovery (BCDR) plan is non-negotiable. During heavy tax-season workloads, firms need to ensure 24/7 availability of applications and data. If your cloud hosting provider has BCDR systems in place, ask about the uptime guaranteed in the SLA. 

Otherwise, opt for a third-party DRaaS (Disaster Recovery as a Service Provider). A DRaaS provider adds an extra layer of data protection and helps ensure continuous operations, even during natural disasters.  

6. Organization-Wide Training 

Hosting tax software in the cloud is only half the job done. A tax firm’s operational efficiency depends on how quickly and smoothly tax professionals adapt to cloud-based tax software. From login protocols to security best practices, employees should attend regular training sessions to reduce transition disruptions. 

Other subjects may involve cyber threat awareness, basic troubleshooting, escalation protocols, and email security. They should also learn how to authenticate accounts, use login methods, use compatible devices, and follow access policies.

7. Support for Compliance Management 

Compliance has long been a challenge for tax firms due to stringent IRS regulations. When you choose a cloud hosting provider, your CTO must coordinate with their technical team to ensure compliance. You cannot leave compliance entirely to the cloud provider, because in the event of noncompliance, you will be held responsible.  

The IRS Publication 4557 clearly states that under the FTC Safeguards Rule, firms must choose a service provider that can maintain appropriate safeguards. However, you must ensure your contract requires them to maintain safeguards and oversee how they handle customer information because you are responsible for compliance. You can also ask the cloud provider for assistance with internal audits and drafting a Written Information Security Plan (WISP), which is necessary for FTC compliance.   

8. Application Compatibility

A complete tax process requires multiple applications, such as CRM, HRMS, payroll, billing, and document management. In the cloud, these applications integrate with tax software (and each other) to ensure automatic data flow. However, while onboarding applications, CTOs must ensure their compatibility. 

Hosting applications in the cloud does not guarantee they will integrate. Incompatible applications can cause data integrity and performance issues. 

Create a Well-Rounded IT Strategy

Moving tax software to the cloud is an important technology decision, but it should not be the end of the IT conversation. For tax firms, infrastructure, cybersecurity, backup, disaster recovery, compliance, employee support, application management, and scalability are increasingly interconnected.

Managing each requirement separately can lead to more vendors, fragmented accountability, added coordination, and gaps across the IT environment. A more strategic approach is to evaluate tax software hosting as part of the firm’s overall IT strategy.

Ace Cloud Hosting provides tax software hosting alongside managed IT, cybersecurity, backup, disaster recovery, and related cloud services, helping firms take a broader approach to their technology requirements. Book a free consultation to learn more.