Newest Outsourcing Wave

Foreign accountants prepare American's tax returns

February 24, 2004

SAN JOSE, Calif. -- Twelve-hour shifts and seven-day workweeks 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 public 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.

"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.

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