This column is not about preparing tax returns for U.S. citizens living abroad or foreigners residing in the U.S. Rather, it is about accounting firms that are outsourcing the preparation of individual tax returns to India.
Last tax season only an handful of firms outsourced their 1040s to India in earnest, although a slightly larger group of firms each sent out a few returns, just to see how the process worked. Indications are that this year will be different with some firms sending out hundreds of returns for preparation in India. The appeal is the anticipated lower cost per return combined with a decrease in the firm's staffing demands.
Firms investigating whether they should outsource to India are asking the right questions about the preparers' competence and knowledge of U.S. tax law turnaround time, compatibility with the firm's software, the Internet connection, security and confidentiality protection, disclosure to clients, and the continued and long-range viability of the outsourcing provider.
The outsourcers are ready with all the answers and are not spending much time with prospects that don't want to sign up quickly. The demand seems to be there.
I believe that is because some accountants are now more willing to take business risks.
And that is the most interesting part of outsourcing to India. If you think about it, this outsourcing harkens back to the Service bureaus widely used by practitioners many tears ago. What amazes me is that accountants now faced with the rapid changes to their profession and increased competition are quickly making substantial transformations in how their firms operate. It is not just tax prep. It also involves areas like partner compensation, going paperless, and marketing just to name a few.
The really successful firm leaders will be those who can think creatively, outside of the box, and are early adopters. I would add two more criteria. They better have a very good batting average on guessing right and becoming adept at developing contingency plans. So why not start with a firm's decision to outsource tax returns to India. Is it needed? Is it worth the risks?
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