Who is preparing your tax return?
Who is preparing your tax return?
Date: Tuesday, April 29, 2003 11:52 AM
JOB DESTRUCTION NEWSLETTER
www.ZaZona.com
U.S. tax returns are being processed in other countries and you can bet
that tax payers aren't being told where their personal information is
going. This form of outsourcing is unethical and dangerous, and should
be outlawed.
An excellent editorial letter by Joe Guzzardi is followed by yet
another braggadocian article in the Indian press.
Lodi News-Sentinel (CA)
April 12, 2003
Opinion by letter writer JOE GUZZARDI
Who is preparing your tax return?
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 Web site, 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.
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 "charted 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 Web site
frequently asked questions 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."
SS&G had meant to test an outsourcing program this year with 100
returns, but stopped after 16 because there were too many problems.
"They didn't get the right answers," Shamis said.
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
http://www.ZaZona.com 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 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.
http://www.siliconindia.com/shownewsdata.asp?newsno=19303&newscat=Technology
U.S. tax returns outsourcing to India gains momentum
IANS
Monday, April 28, 2003
U.S. tax returns, which cover data from social security to personal and
corporate financial information, are passing through India, giving the
debate on outsourcing a renewed intensity.
NEW DELHI: India, which has become the electronic housekeeper to the
world because of its abundant English-speaking qualified professionals,
is fast turning into a destination for processing thousands of U.S. tax
returns.
Although the latest development has spread disquiet among the
accounting community in the U.S., scores of firms are nonetheless
sending returns numbering thousands to India after a study last year
showed impressive results.
Ernst and Young, the global accounting services major, is reported to
have forwarded thousands of American tax returns to its Indian arm
after sending an official familiar with U.S. tax laws to head the
operations here.
"The trend started two years back. What we are actually doing is
providing intellectual inputs to the tax returns process in the U.S.,"
said an official of Ernst and Young's Indian arm.
"It's a perfect example of outsourcing. There is nothing unusual about
the process. All those professionals who provide intellectual inputs
are well-trained in U.S. tax laws," said the official who didn't want
to be named.
Industry sources say that besides Ernst and Young, several small and
medium-sized American companies are also sending returns to India with
a view to cutting costs and increasing turnaround time.
"It's a win-win situation for both of us. While U.S. firms take
advantage of our cheaper cost, qualified professionals and speed, the
companies here will benefit by diversifying their businesses," said the
source.
Industry representatives expect the trend to gain momentum in the years
ahead as many more U.S. accounting firms rush to take advantage of the
speed and cost factors in a slowing economy.
About 20 firms reportedly sent 1,000 returns to India last year on a
pilot basis. The number of firms outsourcing the number-crunching job
to India in the next year is likely to more than double.
India has emerged as a technology outsourcing hub in the last few years
with many overseas companies hiring out functions like data processing
and customer service to cut cost.
According to a survey by Deloitte Research, financial institutions
expect to reduce costs by nearly $1.4 billion each by 2008 by sending
work to low-cost centres like India from developed economies in North
America, Europe and Asia.
Of financial services firms transferring functions offshore, nearly
half are targeting India, which has a huge market of IT professionals
who earn much lower wages than elsewhere.
While sending U.S. tax returns to India might be the latest form of
outsourcing business for accountants here, not everyone is excited in
America with the passage of what some regard as crucial financial
information to another country.
Those opposed to the outsourcing of tax returns argue that transferring
private financial information to another location could result in
increased identity pilfering.
Lloyd Carroll, chairman of the accounting department of Borough of
Manhattan Community College, termed this latest outsourcing trend as
"reprehensible".
"After the debacles of Enron and WorldCom, the last thing the
accounting profession needs is another scandal," Carroll wrote in the
magazine Practical Accountant.
"Shipping tax returns to South Asia and other foreign destinations is a
disaster waiting to happen. In addition to security concerns, I am also
angry about the needless loss of American jobs," he said.
Carroll urged Congress to look into the situation and explore the
possibility of promulgating legislation prohibiting the "exportation of
any American tax return to a foreign destination for preparation".
Experts here, however, say the outsourcing trend is nevertheless poised
to gain momentum as accounting firms in the West look at ways to cut
costs and increase efficiency.
"First of all, it is not going to be everybody and anybody getting
these kinds of projects. It requires some kind of expertise," said Raju
Vohra, a partner in independent accountancy firm Sanjay Chopra and
Company.
"And secondly, the accounting community in India itself has matured a
lot in recent years in terms of focussing on quality and putting checks
and balances in place to address any security related concerns."
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