The recent 2015 California Accounting & Business Show and Conference featured presentations covering new developments and best practices from leading accounting professionals. One particularly profound presentation was made by Chris Frederikson, CPA of 2020 Group USA and Frederikson-Crawford CPAs about new technology including outsourcing tax returns to increase revenue. Frederiksen has been engaged in public accounting for over 50 years and as CEO of 2020 Group USA has spread his knowledge with seminars and consulting.
Over the course of his presentation, Frederiksen made several points about becoming more efficient as a CPA saying one of the biggest mistakes CPAs make is “not investing in technology.” As an example he described how each desk in his firm uses four monitors. I felt the real game-changing information for many CPAs was about how all of the tax return preparation in his firm is outsourced. Frederiksen mentioned two companies which handle outsourcing: SurePrep and Xpitax.
SurePrep is based out of Irvine, California and Xpitax is out of Braintree, Massachusetts. A third firm, Pransform, is based in Chicago. SurePrep and Xpitax outsource returns to tax preparers in India. Pransform utilizes tax preparers based in Thailand. This outsourcing raises the issue of data security. Pransform’s Chief Operating Officer, Hitendra R. Patil, addressed the subject for Pransform’s solutions stating, “We do not keep any client data on our office servers overseas. We simply securely remote login to our clients' tax software to prepare the returns. In other words, the data always remains with the CPA firms.”
Thomas E. Huckabee, CPA has been in practice for 35 years and outsources returns using Pransform. Based out of San Diego, Huckabee’s specialty includes trusts, and counseling small businesses. Huckabee feels the pressure all tax accountants do because tax returns all come due at the same time.
“Technology helped until 2013, when previous technology applications failed. During tax season 2013 we had to produce returns on a manual basis,” said Huckabee. The system was not working to produce accurate stock transactions, W-2s and 1099s. His clients have a lot of stock transactions, but in 2013 it did not populate correctly. His tax provider suggested solutions but could not correct it. For two years it worked well, but did not in 2013. “The scanning in process was not working. Admin time was spent on Adobe, and our network, and our computers, but it was still not close to accurate,” said Huckabee.
Whether it was the computers, the network, or the software, technology did not solve the problem turning tax season into a nightmare. To solve the problem Huckabee decided to work with humans, rather than just depend on technology. Huckabee asked his IT people to check the systems and security of Pransform. “Most of the accountants are in Thailand,” noted Huckabee. “They work while I sleep.” Each day his CPA firm reviews the returns and gets them ready for delivery.
Huckabee’s firm uses a standardized method to organize and turn source documents into pdfs and deliver them to Pransform. They have limited access to Huckabee’s network for his tax program and QuickBooks to compile the tax return. Pransform provides core proficiencies to produce 1120s, 1065s, 1040s and 1041s and perform QuickBooks work, highlighting open issues in a memo.
“We provide a consent notice to clients to meet IRS requirements,” Huckabee said. “A larger notice for 1040s and a smaller one for business clients explaining we are sending the data off shore. It is a signed consent form.”
“The experience has been only positive,” Huckabee continued. “In 2012 all the admin time produced no results from technology. Communications with Pransform continue to enhance results. The other benefit is I don’t have to train them. I had the best tax season in terms of hours and profitability.”
Huckabee can actually talk to the person working on the return but often does not need to. “We can all go home at 6 p.m., while the Thai accountants begin their work day,” Huckabee reported. When complications did occur, Huckabee noted their response. The 2014 tax season was especially tough because his mother entered hospice. Pransform’s production was not working as well as he hoped and he needed more from them. He called and Pransform responded positively. The result was “more production, more sleep and more money,” Huckabee said.
Huckabee’s advice for other CPAs concerning offshore work is to vet the tax prep outsource vendor and ensure top notch data security. There is a normal reluctance to change, but as Frederiksen advised in his presentation, when a solution is this obvious, “get over it and get on with it.”
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