Outsourcing Tax Returns

In the twenty-first century, outsourcing becomes an increasingly preferred option for businesses set on effective cost mitigation strategies. In the world of the tax accountant, this reality remains relevant. Chief executive L. Gary Boomer of Boomer Consulting in Manhattan, KS, claimed that 100,000 American tax returns were completed in India in 2004 (Browning, 2004, p. 1). The technology consulting firm engages over 250 clients and reports exponential growth in the outsourcing trend of both state and federal tax returns (Browning, 2004, p. 1). The outsourcing of this area of business dramatically shifts the way people entrust the sharing of their personal data.

In the article, whether or not Boomer Consulting elects to outsource their tax return business remains unclear; there exists a certain conflict of interest in the sharing of such sensitive information to the press. Accountants typically elect to outsource their work to India because there are well-educated low-wage workers there who do good work (Browning, 2004, p. 1). According to Jay Hauck, more American firms are beginning to simply serve as middlemen in the accounting process than ever before as businesses focus their efforts to maximize profits. (Browning, 2004, p. 1). Despite such advances, certain issues stand in the way of the continued success of this business tactic.

Certain revenues impact outsourcing in the tax accountant profession. In this arena, the Indian equivalent of a certified public accountant earns a few hundred dollars per month while a single complex American tax return could fetch a fee in the thousands of dollars (Browning, 2004, p. 1). According to tax expert Jay A. Soled, it would be a mistake to imagine that those savings are passed along to the consumer (Browning, 2004, p. 1). As such, the opportunity for increased revenues increases dramatically as accounting companies outsource simple returns.

Certain costs, however, impact outsourcing in the tax accountant profession. One of the largest concerns addresses the matter of security. Boomer claims that some smaller accounting firms simply email their returns to India, which creates security risks for identity theft in the case of clients disclosing required personal information on their tax forms (Browning, 2004, p. 1). In other cases, critics question the accuracy of outsourcing American tax returns to foreign nationals (Browning, 2004, p. 1). Despite such hesitancies, tax outsourcing is a booming business that appears to be growing with time.

Several qualitative factors could influence Boomer Consulting on the notion of outsourcing tax return work to India. One of the most important issues is trust. From the client's point of view, the accountant represents a highly esteemed advisor; to claim to work for someone's interests and then send their work abroad would almost certainly cause any rational consumer to reconsider their business relationship with a firm (Browning, 2004, p. 1). In most cases, the American firms minimize the risk of verifying the work before signing it and returning it to the client—more complex tax situations may be retained for completion in the United States (Browning, 2004, p. 1–2). Although security and accuracy may be adversely affected, successful companies recognize that their success depends on their ability to maintain client confidence.

Another qualitative factor depends on geography. Proponents of outsourcing tax returns stress that working with business partners in India allows them to accomplish double the workload due to time zone differences; such an advantage allows businesses to offset the stress of the IRS requirements and tax season and meet client demand (Browning, 2004, p. 2). In doing so, companies can avoid frantic searches for temporary seasonal accountants (Browning, 2004, p. 2). This global distribution of tax processing workload appears to make it easier for successful companies to take on the maximum amount of clients using a presumably proven process.

Reference

Browning, L. (2004, February 14). Your taxes; outsourcing abroad applies to tax returns, too. The New York Times. Retrieved April from http://www.nytimes.com/2004/ 02/15/business/your-taxes-outsourcing-abroad-applies-to-tax-returns-too.html