Should You Send Some Tax Work to India?

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By Ken Berry

Are you having trouble hiring enough staff to do all your tax returns? Consider outsourcing some of the overflow to India.

Shipping work overseas is hardly new. Manufacturers and businesses in other production-type industries have traditionally used this alternative to keep costs down. And troubleshooting and other technology issues relating to electronic devices are often farmed out to foreign resources. Now practitioners who provide professional services instead of goods are picking up on the trend.  
 
One CPA who has successfully transitioned to outsourcing tax work is Patricia Bell Harik, who heads up the tax department at Zdonek & Wolowicz in Torrance, California.  Harik relies heavily on an outfit with a secure website in Boston, Massachusetts. The Indian firm helps her prepare mostly individual income tax returns as well as some corporate and partnership returns. Naturally, the outside workload increases during tax return season.   
 
"It's fabulous," says Harik. "Five years ago, we were forced to do this because we couldn't find any staff members. So we started out of need."  She works with a liaison in India who helps coordinate tax return activities using electronic data. The workers are all chartered accountants who have been trained to comply with the US tax laws.  
 
Harik notes that the cost savings is the main advantage. By going the outsourcing route, she doesn't have to pay the usual benefits, insurance, and other overhead expenses associated with in-house staff members. "It's like employee leasing on a smaller level," says Harik.
 
This option could appeal to other CPA firms in the United States, but proposed legislation offering tax breaks to businesses who hire employees locally might have an impact on outsourcing to India. Notably, the so-called "Bring Jobs Home Act," cosponsored by Senators Debbie Stabenow (D-Michigan) and Sherrod Brown (D-Ohio), is aimed primarily at the manufacturing sector and bans deductions for costs of moving operations abroad. The bill was just defeated in the Senate by a 56-42 vote on July 19. As Election Day draws closer, we'll likely see renewed attempts to pass this or similar legislation. 
 
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I'm in England, so have to deal with a different tax system.

However it didn't work for us. If you have a lot of routine volume work I can see it working. however if you have a wide range of clients you probably need some technical tax input into completing the returns. Also we found that clients don't package up their information and send it to us in a neat bundle. We have to work out what they have missed out. i accept that in the US where everyone has to do tax returns your clients may be better organiised.

When we took account of the time costs from the UK we found that the cost saving was marginal. However the aggravation sector was quite large.

we gave up when we sued a client for a fee and the judge said, "How dare you send client information to India without the client's express perrmission!"

I'm not saying don't give it a try, but rather that your practice may be different from Mr Berry's and before trying it you need to work out whether a production line type facility is what you need.

If anyone in Illonois wants to discuss our experience, grab me at the Accounting Show on 28th and 29th August.

Robert

I wonder if it has occurred to anyone, including the Big 4 and other CPA firms using these outsourcing arrangements, that these foreign preparers should have PTINs and face scrutiny by the IRS.