Posted on 02/23/2004 9:41:52 AM PST by ancient_geezer
Foreign Accountants Do U.S. Tax Returns
NewsMax Wires
Monday, Feb. 23, 2004
SAN JOSE, Calif.-- Twelve-hour shifts and seven-day work weeks
exhausted accountants at Rucci, Bardaro & Barrett. But most painful for
Chris Barrett was the annual "Easter parade" - layoffs of seasonal
workers and interns after April 15.
So Barrett, a partner in the Malden, Mass., firm, will send about 150
of his 600 clients' tax returns this year to India, where recent
college graduates will prepare Americans' 1040s. Barrett won't hire -
or fire - any extra employees, and the average turnaround time for
completing returns is already shrinking.
"We're always looking for ways to reduce the pressure," Barrett said.
"It frees us up to provide financial and estate planning, which we
didn't have time for when we were too busy filling out returns."
Tax experts say Indian chartered accountants - the subcontinent's
version of certified professional accountants - will prepare 150,000 to
200,000 returns this year, up from about 20,000 in 2003 and only 1,000
in 2002.
Critics say outsourcing short-shrifts U.S. accountants and exposes
unwitting Americans to identity theft, which the Federal Trade
Commission ranks as one of the country's fastest-growing crimes.
On Thursday, U.S. Sen. Dianne Feinstein urged major U.S. financial
services and accounting firms to be cautious about outsourcing
sensitive work such as tax preparation.
"I am gravely concerned that consumer data is being sent overseas
without proper safeguards," the California Democrat wrote to chief
executives of Citigroup, Bank of America, Ernst & Young, Equifax and
TransUnion.
But executives argue they can't afford to ignore the trend.
The average accountant in India makes $250 to $300 per month, compared
with $3,000 to $4,000 in the United States. Many firms say they'll use
the savings to undercut competitors or add premium services like
retirement planning. They also say Indian workers will be needed to
replace droves of retiring baby boomer accountants.
"It's going to change the paradigm in which professionals prepare
taxes, maybe even more than the way TurboTax (software) changed the way
individuals did their taxes," said Dave Wyle, head of Newport Beach,
Calif.-based SurePrep, a software and consulting service with 300
Indian accountants in Bombay and Ahmedabad.
In the late 1990s, the nation's biggest accounting firms began sending
bits and pieces of tax work to India - lists of itemized deductions or
schedules of profit and loss - primarily for multinational companies
and U.S. citizens living abroad, said L. Gary Boomer, a consultant for
accounting firms.
Off to India
But in the last year, they've migrated thousands of individual returns
to India, where colleges graduate about 50,000 accounting majors each
year.
Ernst & Young, which employs more than 1,000 workers in Bangalore,
will prepare 15,000 of 100,000 tax returns abroad. Most are corporate
returns. About 4,000 will be for U.S. citizens living abroad, and about
1,000 for U.S. residents, spokesman Ken Kerrigan said.
KPMG, which established an Indian subsidiary in 1993, has six offices
providing tax and other consulting services for 2,000 companies in the
subcontinent. Spokesman Greg Dvorken said KPMG executives "continue to
explore" whether to use offshore accountants for preparation of U.S.
returns.
PricewaterhouseCoopers and H&R Block have no immediate outsourcing
plans. But H&R's mortgage subsidiary, Option One Mortgage, is sending
data entry work to India, and H&R is studying whether outsourcing has
"other possible advantages," spokesman Bob Schneider said.
Critics say risks outweigh advantages.
Although firms have yet to report identity theft or fraud that stemmed
from outsourcing, privacy advocates cringe at the notion of scanning
and transmitting W2 forms - along with the Social Security numbers and
salary information on them - across about a dozen time zones.
Democratic presidential front-runner John Kerry wants overseas call
centers to disclose their location - the New Economy version of the
"made in America" label. Some consumer groups and privacy advocates say
accountants should do the same.
"If we believe in the ideas of customer choice and the market,
disclosure should be the starting point," said Chris Jay Hoofnagle,
associate director of the Electronic Privacy Information Center. "From
there we could explore whether the outsourcing nations have adequate
data protection."
Ernst & Young customers must sign a document acknowledging that a
foreign accountant may work on their return. But most firms don't make
such disclosures.
Accountants outsource by scanning clients' W2s, 1099s, K1s and other
records and sending them to Indian workers through strongly encrypted
e-mail or private networks.
Indian workers complete forms obtained from IRS Web sites and transmit
them to American accountants, who review, print and sign the documents,
thus assuming legal liability.
To protect privacy, tax consulting firms in India - SurePrep,
Datamatics, Xpitax, Outsource Partners International and other firms -
usually have armed guards outside offices. Entry is restricted by
microchip-embedded swipe cards.
At SurePrep, bags and briefcases are prohibited. Computers have no
printers or devices for removable storage like floppy disks. Internet
use is restricted to internal sites and tax research.
Bruce Carlin, managing partner at Worcester, Mass.-based Carlin,
Charron & Rosen, plans to outsource about 2,000 returns - twice as many
as last year and a third of this year's totals. Unless the client asks,
the firm does not disclose that it outsources with Datamatics, Carlin
said.
"The vast majority of people understand what's going on," Carlin said.
A 1040 prepared in India can cost as little as $75 - including labor,
software and hardware costs. In the United States, it would likely cost
as much as $150, Carlin said.
Michael Gray, a San Jose CPA whose firm prepares about 200 returns per
year, worries that rampant outsourcing will limit the experience of
American accountants - and jeopardize the profession.
"If we're sending the bulk of this work overseas, then we're not going
to have the jobs for Americans in the traditional training ground for
CPAs," Gray said. "We may see a brain drain in our industry."
We may see a brain drain in our industry.
A little voice from out of the email void ;O)
"The thought that comes to mind is that in a couple of years, no one in the
US will know how to do taxes anyway, so we may as well admit defeat and
institute the NRST -- it is a balance of trade issue!"
Sounds good to me.
If you would like to be added to this ping list let me know.
John Linder in the House & Saxby Chambliss Senate, offer a comprehensive bill to kill all income and payroll taxes outright, and provide a IRS free replacement in the form of a pure consumption tax:
H.R.25
SPONSOR: Rep Linder, John (introduced 01/7/2003)
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.S.1493
Sponsor: Sen Chambliss, Saxby [GA] (introduced 7/30/2003)
Title: A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States.
Anybody who lets a unknown paper pusher from India do their taxes needs a brain transplant.
WHAT next?
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Howdy, ancient_geezer:Everybody, you're invited to visit FairTax INFO! and take the Survey, if you've not already done so.
Also, you're invited to sign the Petition calling for enactment of the FairTax (H.R. 25): PETITION!
For some History & Background about the FairTax plan, visit HISTORY!
Onward & Upward!
Cliff Cofer - West Des Moines, Iowa
Bye, bye... Income Tax (and IRS)! We won't miss ya' at all!
Detail, Details, Details.
Enact the NRST and repeal the Income tax, no IRS, no Witholding, no problem.
Enact the NRST and repeal the Income tax, no IRS, no Witholding, no problem.
I agree. Also, I live in GA and I am doing everything I can to get those I know to vote for Cain in the GA Republican Primary.
Then we just embargo the entire system and out problems are solve.
Hi geezer:Money Magazine should send a taxpayer's data to fifty(50) different Tax Accountants in India and see if they get fifty(50) different calculations as they do here in the USA. :-)
EVERYBODY: You're invited to sign the PETITION! calling for enactment of the FairTax, H.R. 25!
Cliff Cofer - West Des Moines, Iowa
| Bye, bye, Income Tax (and IRS)! We won't miss ya' at all! |
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