Does it ever feel like staffing constraints are limiting your firm’s potential? Outsourcing preparation offshore with 7216 consent could be your solution.
The tax industry’s staffing challenges
Surging retirement and dwindling graduate rates have culminated in widespread staffing shortages in the tax and accounting industry.
A 2023 survey from alliantTalent found that fewer than 1% of CPA firm leaders were able to find the staff they needed. Another survey by CPA Trendlines Research saw 42% of respondents turning away work due to staffing limitations.
So, what can your firm do to adapt to these conditions? Many tax practices have found success supplementing depleted labor with automation solutions. Other firms with intense workloads might require additional assistance that even best-in-class technology can’t fully accommodate.
That’s why outsourcing has become a popular alternative to hiring full-time and temporary staff. Here’s what your firm needs to know about outsource services and their 7216 consent implications.
How tax preparation outsourcing works
Outsource vendors prepare returns using the same tax software as the firm they service. Once a return is complete, it’s flexed back for the tax practice to review and approve. A high-quality vendor will be willing to collaborate on any review notes and should feel like an extension of your own staff.
1040 tax preparation is the most common outsource service on the market. However, some vendors may also offer business return prep, bookkeeping, or even partial preparation services like Optical Character Recognition (OCR) data verification.
Why firms choose to outsource
Any tax pro knows that workloads surge during busy season, often far exceeding what year-round staff can manage. Even firms that succeed in finding temporary staff still must train them during the busiest time of year.
Outsourcing resolves this dilemma. Vendors employ experienced preparers that specialize in efficient turnaround time and accuracy. Their service gives firms the ability to grow their bandwidth without growing their team.
Is 7216 consent required to outsource?
Internal Revenue Code (IRC) Section 7216 requires signed client consent before a return is given to third-party individuals who provide “substantive determinations or advice affecting the tax liability reported by the taxpayer.” Here’s what that means for outsourcing tax prep:
- 7216 consent IS required to disclose tax return information for anything other than tax preparation.
- 7216 consent IS required to disclose tax return information to an individual OUTSIDE the U.S.
- 7216 consent IS NOT required to disclose tax return information to a tax prep vendor WITHIN the U.S.
Why firms choose to outsource offshore
On its surface, the barrier of 7216 consent would appear to make outsourcing tax preparation offshore a less desirable option. However, many firms prefer it to onshore outsourcing. Let’s take a closer look at a few reasons why.
Pricing
Offshore tax preparation tends to be significantly more economical than onshore options. Depending on the vendor, firms can save more than 50% per return by outsourcing offshore.
Firms are investing deeply into offshoring, and I think it’s pretty fair to say that 20% to 25% of future revenue will be done offshore.
Allan Koltin, Thomson Reuters, December 2023
Quality of service
A vendor’s geographic location shouldn’t have any impact on the quality of service provided. For example, SurePrep’s Mumbai facility has the same training requirements, accuracy performance, and turnaround time as its U.S. facility.
Client acceptance
When Section 7216 updated its provisions to require taxpayer consent, anxiety about client pushback swept the industry. In the subsequent years, firms have found acceptance for 7216 consent to be nearly unanimous.
Firms that leverage offshore outsourcing often recommend treating 7216 consent forms as a standard engagement letter attachment. If clients have questions or concerns, consider sharing the vendor’s security protocols and explaining how outsourcing enables firms to offer them reasonable rates.
We just treat it as part of our on-boarding process. We get very few questions about it. I think the first year that we rolled it out, there were a handful of clients that asked about it and most of them said, ‘If it’s going to save me money on your fees, then use it.’
Beth Attebery, Partner, Henry Levy Group
Why tax professionals love outsourcing with SurePrep
SurePrep’s Outsource team prepares 1040s, 1041s, and business tax return Forms 990, 1065, 1120, and 1120S. Turnaround time for 1040 and 1041 prep averages three business days, with an expedited processing option of one business day.
SurePrep also offers a partial outsourcing service where our team verifies OCR data before it’s exported to your software. Combined with best-in-class automation, this option can eliminate as much as 80% of tax prep for as little as 20% of what full preparation costs.
Tax practices of all sizes use SurePrep Outsource and 1040SCANverify to expand capacity. Whether you’re looking to grow your firm or just get through busy season, our team is here to help. Here’s what a couple SurePrep customers had to say about it.
In this staffing market, you can’t rely on getting all the staff you want. Outsourcing doesn’t save you jobs, it saves you attrition and burnout.
Steven Hart, Chief Information Officer, Janover LLC
Even if it’s just one 1099, it’s good to just get it done. The way your people are trained, it’s all they do; they do it better and faster.
Leah DiGregorio, Partner, Hoffman, Stewart & Schmidt, P.C.