U.S. tax returns processed in India

Date: Monday, April 07, 2003 12:21 PM

H-1B and JOB DESTRUCTION NEWSLETTER

www.ZaZona.com

Just in case you are hiring someone to prepare your tax return, you may
want to ask if your personal information is being sent to India for
processing. These companies said that financial information is
protected because they are thinking about "eliminating the ability of
workers to download data, print, scan or copy." It's not clear how
their workers could process tax forms without being able to download,
scan, or copy. Perhaps that's why they are just thinking about it.

http://www.gainesvillesun.com/apps/pbcs.dll/article?Date=20030406&Category=APF&ArtNo=304060696&Ref=AR

or
http://finance.pro2net.com/x37776.xml

Article published Apr 6, 2003
Tax Returns Taking Passage Through India

NEW YORK Tax returns have always had a grueling route from scraps of
receipts in a shoebox to scrutiny in the halls of the Internal Revenue
Service. Now, some are taking a more circuitous detour - through India.

The accounting industry has recently begun using the burgeoning India
outsourcing and technology markets to process American clients'
returns. In some cases, the work being performed is replacing tasks of
U.S. accountants.

So information like your salary, your bank and brokerage statements,
credit card information, and anything else that you might be submitting
as part of your tax return could be going to companies abroad without
your knowledge.

"It's not simply data entry," said Kevin Robert, chief executive of CCH
Tax Compliance, a tax software company that provides software for an
India-based outsourcer. "We're taking in raw tax source information and
there're going to be levels of interpretation."

While small now, observers predict it will soon be the way the majority
of accounting firms handle individuals' taxes. About 20 firms sent
1,000 returns to India last year on a "pilot basis," said Gary Boomer,
chief executive of Boomer Consulting Inc., a consulting firm for the
accounting industry in Manhattan, Kan. 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.

The country has become a huge technology center over the past several
years, with many U.S. corporations hiring out functions like data
processing and customer service. The work force is both skilled and
less expensive than U.S. counterparts.

Accounting firms typically gave many of the duties being sent overseas
to their junior accountants, who would handle the initial preparation
process.

Ernst & Young LLP now sends about 5 percent of its tax returns to India
for the first fill-out, said Alan Kline, national director of tax
compliance. The firm doesn't consider it outsourcing, however, because
the processing center is Ernst & Young's India office, Kline said.

Smaller firms are partnering with third-party companies that specialize
in providing skilled labor in India, like India-based Datamatics Ltd.
or Outsource Partners International of New York.

While sending returns to India might be a boon for accountants, there
are some growing concerns from critics. Chief among the worries is the
level of training the workers at the outsource centers receive,
particularly since they tend to have no background in U.S. tax law.

"We're looking at sophisticated tax returns" that may take a junior
accountant two years to master, said Gary Shamis, managing director at
SS&G Financial Services, a CPA firm in Cleveland, Ohio.

SS&G had meant to test an outsourcing program this year with 100
returns, but stopped after 16 because there were too many problems,
said Shamis. "They didn't get the right answers."

Others worry that transferring private financial information to another
location could result in increased identity theft.

To protect financial information, some outsourcing centers will
eliminate the ability of workers to download data, print, scan or copy.

To alleviate quality concerns, companies that offer outsourcing in
India promise to hire only chartered accountants with an education at
least equivalent to a certified public accountant designation and
training in U.S. tax law.

Accounting firms also maintain that quality is protected because
responsibility for accuracy still rests with the U.S. firms and the
signing accountants, who continue to conduct reviews of all returns.

"What we make very clear is that we are responsible for anything that
goes out," said William F. Rucci Jr., a founding partner of accounting
firm Rucci Bardaro & Barrett of Malden, Mass.

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