The shortage of accounting talent in the U.S., combined with margin pressure, a seemingly endless tax season, and ever-increasing hiring costs, has firms of all sizes looking overseas to have routine accounting, tax, bookkeeping and payroll work done for them.
More and more U.S.-based accounting firms are using teams of highly educated, lower-cost workers — primarily in Asia and South America — to substantially reduce costs, improve margins, free up U.S.-based staff for higher-value work, improve work-life balance and make the firm more attractive to private equity or other buyers. According to the
While the terms outsourcing and offshoring are often used interchangeably, understanding the differences matters for financial, legal and operational reasons.
Here's how I like to explain it. When your firm has work done in a different country, that's offshoring. Offshoring can be done in two ways:
- Outsourcing — working with a third party to lease or rent offshore resources by the hour or project (time or task).
- Going direct — setting up your own in-house team.
Outsourcing means you've contracted with a vendor in a different country to perform certain tasks, such as bookkeeping, tax returns or payroll. Those workers are not your employees — they're employed and paid by the agency, and depending on how many hours are contracted, they may be working for other accounting firms besides yours.
Direct offshoring, by contrast, means building an in-house team that you manage just as you would your U.S. employees. Advantages include team members selected specifically for your needs, full control over workflows, tools and performance, tight integration with your local operations and culture, and a scalable structure that grows with your business.
You don't have to be a midsized or large firm to benefit. We work with small firms, even fast-growing sole practitioners who have enough incoming work for at least one full-time employee but lack the time to train them or the budget to retain them at U.S. wages. Offshoring frees up the owner's time and provides leverage without fixed overhead. In India and the Philippines, for instance, full-time bookkeepers start at $1,000 per month, and full-time tax preparers start at around $2,000 per month.
Challenges
Despite the clear advantages, outsourcing has had a checkered past with mixed results.
Work quality can be inconsistent. You might get 10 tax returns done flawlessly and another 10 riddled with errors, even from the same overseas vendor or agency — meaning significant rework. There's also a common mismatch of expectations. A U.S. firm might say, "We were promised a senior, but the person we got couldn't do basic tax returns."
This can happen because of how the outsourcing agency model is structured. If an agency has a team of 10, they'll have eight junior accountants and maybe two seniors — but all 10 are sold as seniors. The idea is that junior staff do the grunt work while seniors review it. That used to be acceptable, but accounting firms are more demanding now.
Turnover is another issue. It's higher with outsourcing than direct offshoring because agency workers are frequently looking for better opportunities. Talent, in contrast, tends to prefer working directly for CPA firms and stays longer. That said, firms using the direct ownership model must also accept that some turnover is inevitable and plan accordingly. It's also worth noting that India, the Philippines and Argentina do not have at-will employment. So letting someone go requires more paperwork and can even involve severance. That's why many U.S. based accounting firms use a Professional Employer Organization or Employer of Record for local compliance.
Goals and incentives also diverge under the outsourcing model. An agency boss may tell the team: "I need 200 returns as fast as possible — 100 for Client A, 100 for Client B." But most CPA firms prioritize quality over quantity. That misalignment starts from day one.
With a direct in-house team, you control the incentives — the paycheck, the bonuses and the promotions. If you want careful, high-quality work, you build that culture. In my experience, the direct ownership model consistently produces work quality comparable to what you'd get from a U.S.-based team.
Direct offshoring is also less expensive in the long run, even though you're hiring full-time employees. With no agency taking a hefty margin, you keep more of the savings. To maximize savings from offshoring, it takes two to three years to get it right. But after that learning curve, you can save 25% by going through an agency and 50% by going direct.
Data security
The direct ownership model also tends to offer better data security, which is essential when handling tax returns and financial information. With an in-house team, you own the laptops, control office access and can install security cameras. You can also install laptop monitoring software, which enables you to disable printing and downloading of files, alert you to any suspicious activity, and lock and erase laptops remotely. This way, you're not relying on an agency's word that everything is secure.
You also have more flexibility in how you pay your team — either through a professional employer organization that handles payroll and local labor law compliance, or by registering your own entity and paying employees directly.
Your clients will also feel more comfortable. The firms I work with often tell clients: "We haven't hired helping hands from a temp agency — we've built our own team and vetted every person the same way we do in the U.S." That resonates. If they're your people, clients trust them.
Remote vs. in-office
This comes up frequently. It depends on your firm's preferences and team size. If you're setting up fewer than five workers, I recommend allowing remote work — it reduces turnover and expands your talent pool beyond a single city.
Some firms want everyone in the office for control and security reasons, which is fine. But it's worth knowing that cultural attitudes vary by country: workers in Argentina generally prefer remote, while those in India and the Philippines tend to be more comfortable coming into the office. If you're not experienced managing remote teams, in-office may also be the better fit for your management style.
Do you have to tell your clients?
For individual tax work performed overseas, yes — by law, you must inform clients and have them sign IRS Form 7216. For business tax work, there's no required form, but you should disclose offshore work in your engagement letter. Outside of tax, there's no legal requirement, but you should tell clients anyway.
Most won't have a problem with it. Their IT firm is likely offshoring. Their tech stack probably is too. Just have your talking points ready before the conversation happens. When you tell a client you're offshoring, they'll immediately ask what work is going offshore, how you chose the team, and how you're protecting their data. Be prepared with clear, confident answers.
What to look for in an offshoring partner
The space is getting crowded, with tech and education companies adding offshoring as a side offering. Only work with vendors whose core competency is offshoring. Ask for U.S.-based reference firms you can speak with. Look for partners who give you maximum control over the employment relationship, the processes and the technology.
Beyond cost savings, offshoring done correctly gives you access to great talent, faster turnaround times and the capacity to take on more business. You can launch new services, scale quickly and position your firm as a modern, forward-looking practice — which ultimately boosts enterprise value. Lastly, make sure to consider both the agency and direct models, regardless of your firm size, to see which one makes the most sense for you.
