Outsourced Tax Processing Gains Popularity Among Accounting Firms

Business Process Outsourcing (BPO) is a popular current trend among many types of companies, and accounting firms, including the Big Four, are getting on the bandwagon.

According to a survey by CFO Magazine and AMR Research, 68.3% of companies expect to increase outsourced services in the next year.

Big Four firm Ernst & Young reports that it sent tax returns to its Indian office for processing this year. It is estimated that as many as 50 U.S. accounting firms outsourced tax return preparation to India during the past tax filing season.

Because of a flat economy in which revenues are not increasing, companies report a need to cut expenses in order to produce growth in net earnings. Work can be outsourced to countries like India where wages are lower than in the U.S. BPO firms report that tax returns can be processed in India for 50% of the cost to do the same work in the U.S.

As long as a high quality of service is maintained, the work will continue to be outsourced. "The comfort level of American companies with Indian workers is growing, and it will continue to grow," said Gurucharan Das, an economic analyst and consultant for Indian companies that provide outsourcing services.

One company that is providing tax preparation outsourcing services is Datamatics Technologies. The company is providing tax services for U.S. companies in the spring as well as working with extended tax returns in the summer and early fall.

“The U.S. has the highest tax paying population world-wide. Even if 10% of this were to be outsourced, it would amount to a huge number for Indian BPO firms operating in this space,” said Datamatics' managing director and CEO, Manish Modi. Datamatics processed 10,000 tax returns last year and expects to process between 25,000 and 45,000 this year. Another firm, Outsourcing Partners International, also reports preparing 10,000 American tax returns last year.

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