Taxed here, prepared in India

It’s almost April 15. Do you know who prepared your tax return this year? Even if you think you do, are you sure it was prepared in the United States?

More U.S. accountants are turning to their counterparts in India to help prepare tax returns for their clients in this country.

Indian chartered accountants — the subcontinent’s version of certified public accountants — will prepare between 150,000 and 200,000 returns this year, up from 20,000 in 2003 and 1,000 in 2002, according to the Associated Press.

Outsourcing helps U.S. accountants save money. A 1040 form prepared in India can cost as little as $75, including labor, software and hardware costs. In the United States, the costs can reach as much as $150, accountants told AP.

But the practice has come under scrutiny from lawmakers and industry officials concerned about potential privacy implications of shipping tax-preparation work to foreign countries.

“I am gravely concerned that consumer data is being sent overseas without proper safeguards,” Sen. Dianne Feinstein, California Democrat, wrote in a letter to the chief executives of several financial firms last month.

“In my view, American companies which are outsourcing consumer data to foreign countries must assume responsibility for the data. American consumers simply do not have the resources or legal remedies to address misuse of their information by foreign companies or their employees,” Mrs. Feinstein wrote.

The American Institute of Certified Public Accountants, the industry’s largest trade group, recently published an article in its newsletter to remind its members about the need to protect the privacy of their clients when outsourcing, a spokeswoman said.

It is not illegal to ship tax-preparation work overseas, and tax preparers are not required to inform their customers if the work was done in a foreign country, according to Sam Serio, an Internal Revenue Service spokesman.

“But if someone is really concerned about this, then I would recommend they ask their preparer if the work will be done overseas,” Mr. Serio said.

Of the nation’s “big four” accounting firms, only Ernst & Young LLP outsources tax preparation overseas. Spokesmen for the other three — Deloitte Touche Tohmatsu, KPMG and PricewaterhouseCoopers — said their firms do not send work overseas.

The nation’s top two tax-preparation firms, H&R Block Inc. and Jackson Hewitt Inc., do not outsource overseas, representatives said.

Representatives for many of the largest accounting firms in the District and its suburbs, said they do not ship tax-preparation work overseas. Officials at the Greater Washington Society of CPAs, a local trade group, said they were unaware of firms in this area that outsource tax returns to India or other countries.

Chris Barrett, a Malden, Mass., accountant, told AP his firm will outsource work to India to avoid having to hire and fire seasonal workers, to reduce the burden on permanent employees and to speed up the turnaround time for completing returns.

Mr. Barrett predicted his firm will send about 150 of its 600 clients’ tax returns to India this year.

“We’re always looking for ways to reduce the pressure. It frees us up to provide financial and estate planning, which we didn’t have time for when we were too busy filing returns,” he said.

Ernst & Young does not outsource to a third-party firm, the technical definition of outsourcing. Instead, the New York firm simply ships some work to an office it has in India, according to spokesman Ken Kerrigan.

Overwhelmingly, the work Ernst & Young sends to its Indian office are corporate tax returns, he said. In most cases, workers in the office do simple data entry, Mr. Kerrigan said.

“While we’re sleeping here, the grunt work is being done there,” he said.