Out-sourcing tax preparation

[taxmandan]

Does anyone outsource the data entry of personal tax returns to a third party? My software company had a relationship with one of those companies a few years ago but when I tried them it was a disaster. The biggest problem was their inability to process hand written information, even on a formatted organizer. They also messed up the data so often that it was not practical to use them. I don't have any knowledge about any of the other companies and would appreciate some suggestions for who does it right and if you think it is worth the cost. With the overwrought employer laws in our state it is something that would be less problematic for our office than trying to hire local talent. Thanks,
Dan

[ATSMAN]

I forget the name of the company now but about 5 years back an Indian back office company was selling data input and electronic paper work organization/filing services for roughly $2 per hour. A lot of the attendees were concerned that they have no control over data security once the taxpayer data is out of the country. I remember they were saying that the top 5 accounting firms outsource most of their data entry chores offshore.

I personally would NOT outsource data entry to an offshore company.

[kathyc2]

Absolutely no way would I even consider doing this. I hope, that at a minimum, there is a regulation to disclose to clients how they are handling their information.

[Lion]

Try CCH's Scan & Flow to do your data input, organize/bookmark it in tax return order, and include client notes and yours. Or see what your software company has available now as a scan/flow-type product or for current outsourcing within the US or abroad. Make sure you use proper disclosures if data will go outside your company and, especially, outside this country.

[WICPA]

A friend of mine was recently at a conference in CA where this was being suggested. She told me the presenter said they were getting more accurate work completed by out sourcing returns to India compared to what they could hire here. She said one firm discloses to clients that they intend to out source and if the client chooses not to, the cost of tax preparation doubles. I wonder what working conditions and pay is for the people doing the work.

Personally, I would never consider it. As part of my engagement interview I tell each client that I work on their return and if there is a mistake, it is on me. Just seems many planning opportunities arise in the course of preparing a return.

[taxmandan]

Thanks for the input, I guess none of us small operators use this since no one has direct experience on the forum. Most of the local CPA offices do this but the cost of their outsource sites is too high for my office and/or clients to consider.

[Burke]

She told me the presenter said they were getting more accurate work completed by out sourcing returns to India compared to what they could hire here.

I am not buying that at all. How would they know unless they reviewed every return against the input sheets? The whole reason they are doing this is to save money by paying subsistence wages. They would have to transmit all the data to India somehow. Over the internet? It removes the process from the educated and trained tax preparer to determine if things are outside of normal ranges, or questionable deductions, etc based on the TP input. As a taxpayer, I would run from any firm doing this.

[Lion]

My software offers outsourcing, both US-based and overseas, but requires a minimum number of returns to outsource. I'm too small to do it even if I wanted to do it, not enough returns that would be good candidates for outsourcing.

[TaxGuyBill]

Lion, are you saying your software has that built-in? Interesting. What software do you use?

[Lion]

It's a fee to outsource, but yes, ProSystem fx does offer outsourcing from within my software. I haven't used it, but there's a button to click to upload returns; I can track progress and download the returns back into my software, if I used CCH's scan product to scan the client documents, organizer, whatever into my software. Or, I can scan the client documents, etc., into a client folder to send using Adobe or whatever I want to scan (use the files my clients upload to my portal or otherwise send me electronically, maybe?). As I say, I haven't used it, but they make it sound simple. And, I can see where it would be a time-saver for data-entry heavy returns. Less so for returns with a lot of decision-making needed to allocate information across the tax return. I was swamped one year (hip replacement or something) and looked into it, but didn't have more than about 20 returns that I thought it would be a help to me, and whatever number I had was less than the minimum. It's probably available for all CCH tax software. Maybe your software has outsourcing available. I looked at US-based only.

[ATSMAN]

I wonder what working conditions and pay is for the people doing the work.

I had a client that was involved in back office processing in India and based on my limited knowledge there is a glut of college educated people that do mundane data entry work. The public accountants there are called Chartered Accountant (like CPA in USA) and generally they review the work. Most of these outfits run "sweat shops" and you would pay more for an American to flip hamburgers than a CA review tax data in India!

[ToddFogelberg]

I remember seeing a story on 60 Minutes about an entrepreneur who was starting an outsourcing shop in India (this was 15 years ago). As far as I can tell, it hasn't caught on or put a dent in the revenue of traditional tax preparers. Never made sense to me...the data entry portion of the return is when I "learn" the client's situations and start thinking about how I will review the return with the client and offer advice for the future. Having someone else punch in tax documents really doesn't save me much of anything, in fact it complicates my process. Now I have to double check someone else's work (which can more time than doing it myself) and still read the information for review and advice purposes. Much of the basic information on the return pulls forward from year to year...again reducing my workload. Drake offers something like what you are talking about (Gruntworks) but I have no need for it. I'm a "1040" shop doing 700+ returns by myself. The average return takes me about 30 minutes to prepare. This doesn't include the time spent with client doing review and planning, etc.

[ATSMAN]

I'm a "1040" shop doing 700+ returns by myself. The average return takes me about 30 minutes to prepare. This doesn't include the time spent with client doing review and planning, etc.

You must be a super human!

That is a great feat. You don't need outsourcing to India.