View from Lodi, CA: April 15 Is Being Outsourced Too!
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In my adult life, there are two things I have never done: changed a flat tire and prepared my own income taxes.

The California Automobile Association takes care of the former and Solari Accountancy manages the latter. In exchange for reasonable fees, I receive professional and timely roadside auto service and income tax advice. My accountant, Jon Solari, does his tabulations right in front of me.

But a recent and growing trend in the tax preparation business is for CPAs to send your financial information overseas—most likely to India.

Outsourcing is the new name of the tax game. 

Consolidations in the accounting industry have created unprecedented change. Competition is more intense than ever. And as the pressure for bottom line results builds, outsourcing is seen as one solution.  

Outsourcing is starting quietly—as it always does. According to Gary Boomer, the chief executive of Boomer Consulting Inc, a consultant to the accounting industry, about 20 firms sent 1,000 returns to India last year on a "pilot basis." This year, he thinks 50 firms are using these services and that about 25,000 to 45,000 tax returns will be processed in India.

Large firms like Ernst and Young LLP send a small percentage of its returns to its India office.  Smaller firms hook up with outsourcing specialists like India-based Datamatics Ltd., Outsource Partners International of New York or California's SurePrep.

From its website, SurePrep offers these impressive claims to accountants:

"What if you could prepare a thousand more tax returns without adding even one more staff member? And what if you could prepare those returns for up to 50 percent less than what it costs you right now? You can with SurePrep. And with virtually unlimited ability to prepare and process returns, you can increase volume, multiply profits and grow your practice.

With a large staff of Chartered Accountants located offshore, SurePrep enables you to prepare far more tax returns at up to half the cost without sacrificing quality or control. SurePrep Chartered Accountants average five years of professional tax and accounting experience. They also receive continuing education from U.S. tax professionals to keep current on the latest changes in U.S. tax code. The net effect is a gain in experience that results in the highest quality returns as well as increased client satisfaction. And with a standard turnaround time of just two business days—and as little as one business day when needed—SurePrep also offers the advantages of greater speed and increased efficiency."

Everything sounds so wonderful—especially for the accountant saving the time and the money. But for the taxpayer, important questions remain unanswered.

The level of training the "Chartered Accountant" receives is one of the main areas of concern. Just because SurePrep says the accountants are qualified doesn't make it so. And how can you check?

Notice this curious quasi-disclaimer from the SurePrep website F.A.Q. page:

Q: What do I tell my clients about who is doing their return?

A: While SurePrep's accountants will prepare the tax returns, our role is transparent to the process from your clients' perspective. Your firm is responsible for reviewing and approving the return prior to delivery. 

Gary Shamis, managing director at SS&G Financial Services, a CPA firm in Cleveland, Ohio, adds his reservations: "We're looking at sophisticated tax returns that may take a junior accountant two years to master." [Some U.S. tax returns detour through India, April 7, 2003, Dow Jones/AP]

SS&G had meant to test an outsourcing program this year with 100 returns, but stopped after 16 because there were too many problems. Said Shamis: "They didn't get the right answers."

Another taxpayer concern is identity theft. Outsourcing centers promise to protect financial information by eliminating the worker's ability to download, print, scan or copy financial data.

But as Rob Sanchez, an outsourcing critic and the Webmaster of questions, "How would they be able to process tax forms without being able to do any of those things?"

Solari agrees that inadequate training and identity theft - "all those social security numbers floating around out there"—are the two gravest areas of concern.

And, adds Solari, "like banks and brokerage firms, CPAs are covered under the federal Gramm-Leach-Bliley Act governing financial privacy. They must disclose how they may use their clients' personal information. I wonder if these CPA firms tell the clients their personal data will go to the outsource firms."

The recommendation from this corner is if you have any doubts about where your taxes are actually being prepared, ask your accountant.

Joe Guzzardi [email him], an instructor in English at the Lodi Adult School, has been writing a weekly column since 1988. It currently appears in the Lodi News-Sentinel.

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