Is Tax Outsourcing Growing or Declining?

Source: Accounting Technology

One practitioner said he never had a favorable view of outsourcing, but used it as a last resort. Now that he has been able to hire experienced accountants, he does not intend to outsource. The benefits of outsourcing—lower cost and faster turnaround—have been offset by fears of lack of privacy and security. This has led to a decline in business for some outsourcers. AICPA and California rules requiring firms to notify clients if their tax information is outsourced have aggravated the problem.

However, some outsource vendors are seeing continued growth. Some of the growth is coming from the addition of other services such as write-up, payroll, and Sarbanes-Oxley compliance. Some of the increase comes from addition of other tax preparation services for 1120, 1120S, 1065, 1041, and 990s. Other outsource vendors are helping firms improve the efficiency of outsourcing as well as in-house preparation with the introduction of workflow applications.

Although accounting graduates are expected to increase, tax preparation is not what these graduates are interested in.

Increased efficiency in tax return preparation is seen by some as the alternative to outsourcing. The objective is to eliminate manual data entry by electronically entering original data into the tax preparation application. But some think outsourcing solves the data entry problem and allows young accountants to work on more challenging and rewarding projects. Both these solutions should result in changed perceptions that will further increase the number of accounting students.

Some firms have used outsourcing to help maintain a healthy work/life balance among their staffs.

Xpitax and Sureprep have initiated work flow applications to integrate outsourcing into firms’ processes. These applications can be used without outsourcing. Xpitax created a software product called XCM, a Web based application. It allows firms to track in-house returns electronically, keeping down the time spent in finding a return to assess its status. One firm says it saves 30 minutes per return. It prepared 2000 returns last year and saved 1000 hours.

Being able to be more efficient without outsourcing is exciting a lot of firms. The objective for them is not low priced labor, but more efficient workflow.

From: Accounting Technology, September 2005. For the complete article, click on the following link: http://www.webcpa.com/article.cfm?articleid=14401&;pg=acctech.