Outsourcing Seasonal Tax Prep Services

Does anyone have any experience with outsourcing part of their seasonal tax preparation services? Has anybody ever used a foreign outsourcing firm?

Just the thought of it curdles my morning coffee. How would you keep oversight over a foreign company where you could not even see their operation? I might be missing something, but if I sent returns overseas to be completed, I would have to spend as much time going over them to make sure they were correct as I would just doing them myself.

An overseas outsource company could be hiring anyone with any skill set and you would have no way to know it. Would you hire someone to work in your office that walked in off the street claiming to know what they were doing without checking their skills prior to turning them loose on your clients? I think not!

See Treas Reg Sec 301.7216-2(c)(2). You have to get the client's written consent to send their tax info offshore. I can't imagine many clients saying sure, go ahead and send my personal financial info to China or India or Australia. The AICPA has taken a different stance, and some of the offshoring companies have adverted the rules by having accountants outsource to a branch within the USA, which then outsources overseas. If you tell the client you will surely incur their wrath; if you don't, will you sleep at night?

I use an online company to find writing freelancers, and there are tons of tax firms on there looking for freelancers to outsource work to. There are plenty of overseas accountants doing FATCA and 5471 reporting on a freelance basis.

A while ago, I referred out (to a colleague) some 1040 work that came my way that I didn't have time for. Through the grapevine, I heard that one of taxpayers I referred to colleague wasn't all that happy with the service. So, I called this taxpayer and was told that taxpayer met with my colleague, but by all accounts, it turned out that the return was actually prepared, not by colleague, but offshore. I can't recall the details, but I think the disclosure was made, but was imbedded in the colleague's engagement letter somewhere.

The return was straightforward. But nothing beats a conversation and a careful examination of documents. Taxpayer gave all docs to colleague, including a 1098. Perhaps the 1098 wasn't discussed at taxpayer/colleague meeting, I don't know, but taxpayer gave it to colleague for sure. The big interest deduction never hit the return. It related to investment land and should have been taken as investment interest expense, but was missed. I suspect colleague just dropped the docs in a scanner and sent them to the true preparer. Had colleague prepared the return, one would think an inquiry would have been made as to the 1098.

I stopped sending my overflow to this colleague.

Sounds like a job for Super-Guya or Super-Lizzit.

The question of reviewing the returns prepared by an outsourcing firm is not an issue. I personally review all returns and this would not change if I hired someone to be at my office preparing returns or if they were working outside my office. I am trying to look at various options that would help my firm grow. Experienced tax preparers in my small town are hard to find so I started researching outsourcing firms. Most outsourcing firms that I have found use foreign workers so I was interested to see if anyone had had any experience with this type of outsourcing. I would rather use USA outsourcing firms if anyone has any recommendations. Also, does anyone have any experience using the tax preparation services of freelancers on elance.com. I'm just looking for ways to grow my firm here without killing myself in the process. Any constructive advice would be extremely helpful. Also, I don't hire anyone without performing due diligence under AICPA rules and beyond.

I'm just looking for ways to grow my firm here without killing myself in the process.

I myself don't think this is the right way to do it. I think this is why the traditional route is tried and true: You'll need to partner with someone and/or actually hire people beneath you (and train them). Yes, this is a much larger investment and many more headaches (payroll, bigger office, computer network, etc.), but you get what you pay for.

and this would not change if I hired someone to be at my office preparing returns

I vote for this.

And, it might be that you actually do have to kill yourself for a tax season or two. Not ideal, but it might serve a lot of purposes. First, it might provided the added funds to support the costs of hiring someone in the following tax season. And second, you'll have the client base built up to the point where, when you do add someone to help, that person will have enough work to keep them busy.

Interesting. I would never send anything to India or China or for that matter to any overseas countries that has client personal data. Though, I would be interested in free lancing or having a job contracted to myself. How would I charge a client that wants to outsource to me? (i.e. Hourly, Flat fee etc) What are the market rates?

I'm getting different prices for various tier level of returns. For example, for tier 1 individual returns, I'm getting prices from $38 to $63; tier 2 individual from $85 to $142; tier 3 individual $140 to $194. Most of my clients would fall in the tier 2 level since most have a schedule c, e or f.

It would be great if I could find a CPA, EA or someone with over 5 years tax prep experience in the USA that would be interested in performing some seasonal tax prep work for our firm.

I'm getting different prices for various tier level of returns. For example, for tier 1 individual returns, I'm getting prices from $38 to $63; tier 2 individual from $85 to $142; tier 3 individual $140 to $194. Most of my clients would fall in the tier 2 level since most have a schedule c, e or f.

I am not a CPA or EA though I am preparing for my EA but if you need any assistance in outsourcing these over to my company, I would gladly assist. PM me if you need further info.

It would be great if I could find a CPA or EA in the USA that would be interested in performing some seasonal tax prep work for our firm.

I'm in Illinois, I'm not an EA, but I've been doing 1040s for quite some time. I would be interested.

I have as much work as I want and am not interested but I think you should value experience over accreditation.

See Treas Reg Sec 301.7216-2(c)(2). You have to get the client's written consent to send their tax info offshore. I can't imagine many clients saying sure, go ahead and send my personal financial info to China or India or Australia. The AICPA has taken a different stance, and some of the offshoring companies have adverted the rules by having accountants outsource to a branch within the USA, which then outsources overseas. If you tell the client you will surely incur their wrath; if you don't, will you sleep at night?

With all due respect, I am extremely familiar with the requirement to get the client's consent. I don't do anything in my firm that would make me unable to sleep at night. I think that most clients would not mind having the option as long as I am the reviewer and have done my due diligence to ensure that their data is safe. You just have to make sure you know who you are doing business with domestically and internationally. I'm sure that there are a lot of US companies & foreign companies that I would not trust my client's data to. I'm sorry that I'm rambling on but I take great offense when someone questions my integrity. All I wanted to gain from the original post was other firm's insight based on actual experience on outsourcing to domestic and foreign entities. All of the large accounting firms outsource so I'm really not sure where all of this hostility is based.

Just the thought of it curdles my morning coffee. How would you keep oversight over a foreign company where you could not even see their operation? I might be missing something, but if I sent returns overseas to be completed, I would have to spend as much time going over them to make sure they were correct as I would just doing them myself.

An overseas outsource company could be hiring anyone with any skill set and you would have no way to know it. Would you hire someone to work in your office that walked in off the street claiming to know what they were doing without checking their skills prior to turning them loose on your clients? I think not!

I check everyone that I hire out, that would be no different if I decided to hire a domestic or foreign outsourcing firm. I would also continue to review all returns. This is something that I have always done in my 15 years of private practice. And I would never let anyone loose on my clients. The outsourcing firm would be more of a data entry outsourcing service. My firm would be the one that made all client contacts. You can bet your bottom dollar, if I'm signing my name to a return it is going to be reviewed in-depth by me. I'm very annoyed by the attack on my integrity when I am asking for other tax professional's experience as it relates to outsourcing.

They are raising good points and looking out for you - not "attacking your integrity" or being "hostile".

Re-read your original post that started this thread and I think you can see that the two responses immediately afterward had merit, given the scant information you posted when you first asked your question.

You didn't clarify your game plan until your second post in this thread.

I'm getting different prices for various tier level of returns. For example, for tier 1 individual returns, I'm getting prices from $38 to $63; tier 2 individual from $85 to $142; tier 3 individual $140 to $194. Most of my clients would fall in the tier 2 level since most have a schedule c, e or f.

I don't know about anyone else, but I see those prices and I can't believe that this would be economical for you unless you are in a very high cost-of-living area. You could probably hire an experienced employee on $50/hr and save money compared to what you've been quoted.

It's tough to give advice because you haven't given a lot of information about yourself. Do you work alone or do you have anyone else working for you? If you work alone, then maybe you don't need a person to do tax returns: you need a person to assemble tax returns, answer the phones, call clients, sort through receipts boxes, things like that. Maybe you could network with the accounting instructors at a local college to get a good, ambitious student anxious to cut his or her chops in a small tax firm for the experience and the resume entry. That person could also data enter some of the easier tax returns for you. If you're going to review all returns "in-depth" as you say then how much of an advantage is a highly experienced person going to be to you anyway?

One last point: just because the big guys do something doesn't mean that it's a good idea. (book recommendation "Confidence Games" by Tanina Rostain and Milton C Regan Jr) A friend of mine has worked for several accounting firms, including one Final Four firm, and he took a very dim view of the tax outsourcing. Part of it was that the staff accountants were failing to develop the skills by not actually working through the returns, and part of it was the quality of the work done. Not hugely relevant to you, of course, but an interesting point nonetheless.

Don't know if you found a solution, but I'd be willing to handle some returns for you. I'm just starting my CPA firm so I think I'll have some capacity.