Outsourcing, A Mighty Wind?


Back in the 1980s, local governments in New Jersey were concerned about the impact of video game parlors on their youth. It was on the order of "We have trouble right here in River City and that starts with T and it rhymes with V and it stands for video." There were local ordinances adopted that limited operation of video game locations during school hours, while a great deal of anguish was expressed about the possible impact of violence along with loss of focus on more suitable activities. Then, home gaming machines came along and pretty much put stand-alone video game stores out of business, with those few surviving located in places like malls and movie theaters.

In the last two years, we might say we have trouble and it starts with O and it rhymes with "Oh" and that stands for outsourcing, outsourcing of tax preparation to off-shore locations.

Back to the Web

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As with the video game experience, the question about outsourcing should be, "Is all this worry really necessary?"

There are concerns over taxpayer privacy, data security, the accuracy of the work performed by foreign (largely Indian) accountants, the need for oversight, and the possible loss of jobs in the United States.

While these concerns are legitimate, the uproar came from a profession in which there are many people who can remember mailing forms via the U.S mail to be processed at mainframe-based service bureaus, and then waiting for the mail to return. Some still do. CCH still operates a service bureau with paper flowing back and forth. Let's not forget organizations that phone or fax payroll data to a service bureau. And with double-digit error rates reported on tax returns that are sent via paper to the IRS, and the profession knows that it's an error-filled process, you could almost make the case that a professional who still uses paper is not exercising control over client information.

Even in the computer era, returns were still sent outside the offices of the originating firm. Tom Davis, a CPA based in Valdosta, Ga., has said that because of the number of returns handled in his area, south Georgia was the outsource center of the United States.

The boom in outsourcing did not occur in 2005 and it may not occur in 2006. Growth appears to have been flat, held down probably by the concerns that have been previously mentioned.

It's hard not to believe, as one vendor commented, that growth would pick up in the next year as firms move beyond their concerns and learn how the outsourcing system works.

Outsourcing seems like a viable way to reduce costs, although some things that seem really good to journalists don't appeal to the people who use them in their daily businesses. The one difference may be that companies are willing to outsource non-core functions. But tax preparation is a core function and professionals want to maintain control.

I can't help feeling that that feeling is going to change.

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