The Untapped Opportunity in Tax Delivery

Authored by: Kevin Zeman, Principal, Tax
Published on: September 17, 2025

Why fund administrators can not only transform firms operational burden, but enhance LP satisfaction

In private equity, tax compliance is a necessary but burdensome part of doing business. Yet, in an environment where CFOs are increasingly stretched thin, the delivery model for tax services has become just as important as the technical capabilities behind them. While a range of approaches exist, enlisting a “full capability” fund administrator to ease the burden can deliver unseen benefits that make a real impact.

Today, most PE firms fall into one of three categories: 1) Those who default to the Big Four by mandate; 2) Those with enough internal sophistication to manage a single-source provider; and 3) a much larger, underserved group in the middle that would benefit from a new approach where fund administrators partner with the client to play a central role in tax execution, instead of just tax return creation.

By integrating tax services with fund administration to create a single-source provider, private equity managers can unlock operational efficiency, reduce compliance drag, and improve the reporting experience for investors without sacrificing quality or control.

Tax as a service function, not a year-end event
The traditional “return season” model limits tax advisors’ ability to proactively support their clients, often missing the everyday operational realities of a fund manager that can materially affect performance and investor communications.

When a tax team is embedded within the fund administration workflow, tasks that previously could take days to resolve can be addressed in real-time. For example, multi-party email chains comprising separate tax, accounting, and reporting teams generate significant delays in response time as coordination is limited and the firm itself must facilitate the back and forth. With multiple vendors, one request from a tax advisor may require the fund to pull documents from its administrator, organize it all internally, and then schedule a call to coordinate. With a fund admin that also manages tax operations, this can be addressed with one click, saving hours of dead time.

Real-time surveillance enables better risk management
Many firms avoid real-time cash flow assessments simply because there is not enough time or capacity to coordinate them. Many Big Four tax engagements aren’t structured in a way that allows them to hold calendar space for quick-turn questions, where fund administrators with integrated tax functions are.

This kind of “always-on” monitoring makes it easier to identify issues early, improving fund and limited partner experience by eliminating or mitigating issues. Cash management is a prime example. A few missed details can result in unnecessary capital calls, disruptive bank interactions, withholding headaches or compliance errors. Real-time access to tax expertise shifts a reactive approach to one that is more forward-looking and adaptive. When you change your model to address cash management and the effect the tax has on it, there is a real opportunity to be a differentiator. The reduction of operational friction may even contribute a couple of basis points here and there.

A better experience for CFOs and investor relations
Perhaps the most overlooked benefit of an integrated model is a psychological one. Even if some of these examples don’t materialize, having a partner that understands that this matters and can expertly discuss it makes firms more comfortable with service delivery.

Many CFOs feel unable to even ask their tax provider basic questions for fear of taking blame instead of getting a solution. Over time, this discourages engagement and increases the internal burden on finance teams.

Changing the delivery model through integrated tax and fund admin services, those barriers dissolve. Tax issues can be surfaced by accounting teams, be resolved quickly, and passed back to clients without the need for overengineered internal coordination. That translates into shorter turnaround times and fewer internal distractions for the CFO and their team. The advice and collaboration becomes more approachable, tailored to the fund’s needs.

For example, a fund admin managing tax services can facilitate payments through an aggregation strategy. If a company sends the fund admin $10,000, the admin can send the money to 40 states in $250 increments, so the CFO doesn’t have to do it, and just hand the journal entries to the accounting team so they know how to book the accounts. The tax team is then activated to monitor communications from the states, including notice responses and the effect on the LPs or financial statements, widening the range of traditional in-scope activities. It’s hard to imagine a CFO at a billion-dollar fund taking seven hours to try to remember the logins for the Minnesota State tax payment website. These kinds of practical, tax-adjacent operational fixes improve experience by solving real problems.

Many private equity CFOs are required to learn more about tax than they ever wanted to because in many cases, there’s no one else to do all these things that their “traditional” tax preparer won’t do. There is an “a-ha!” moment when they realize they can redefine their outsourcing into a partnership with their fund admin.

Private equity firms don’t need to overhaul their entire tax functions to improve performance or maximize operational efficiency. They just need a new way to access the talent and tools that already exist.

For the vast middle of the private equity sector, those without deep internal tax infrastructure or a Big Four mandate, partnering with a fund administrator that has invested in bringing high-quality tax capabilities into their service model provides a valuable solution that reduces operational drag, prevents errors, and elevates the client experience. 

Originally published in Private Funds CFO on August 18, 2025. Republished with permission.