Welcome back to the myths of international tax outsourcing! If you missed the first installment, click here to read it, and keep reading to learn about some of the most common international tax outsourcing myths, as well as how to handle the 7216 conversation with clients. Let’s dive right back in!
Myth: My client will have tons of questions I can't answer; they'll never let me outsource their return.
Fact: While some clients express concerns, most clients don't question if or why their return is being outsourced.
There is a perception that every client the firm is considering for outsourcing will have lists of questions and want every detail about the process. The truth is, most clients don't even ask about why their return is being outsourced. You are their trusted advisor. Most clients trust that you have done your due diligence in vetting a tax outsourcing provider. If you're ok with it, then they are, too.
For those few clients who do want more information about outsourcing / have concerns about their information being outsourced, be prepared to answer such questions as:
- Who is (the outsourcing provider)?
- Is my information safe?
- Who will be responsible for my tax return?
- Are the overseas accountants knowledgeable about U.S. tax laws?
- How does the process work?
- Why does your firm use a third-party vendor to work on tax returns?
An experienced tax outsourcing provider should provide your firm with an FAQ to help answer client questions like these. If, after answering their questions, the client still has concerns about their return being outsourced, offer them the option to continue to have their return done in-house.
Myth: My staff will be replaced if the firm uses tax outsourcing.
Fact. Tax outsourcing is not designed to replace existing staff; it's designed to reduce stress and late-night hours amongst staff during busy season and other peak times of the year.
When outsourcing discussions occur within a firm, the initial reaction of many staff members – especially first- and second-level preparers – is concern about job security. While we cannot speak for other tax outsourcing providers, to the best of our knowledge, no staff person has lost their job due to a firm's decision to outsource with Xpitax. Firms generally choose to outsource tax preparation to create efficiencies within the tax department and have a more streamlined process during peak seasons.
Tax outsourcing allows staff to perform detailed reviews and creates time savings for managers and partners to perform value-added reviews and services. Other benefits seen by staff at all levels include:
- Reduced time in office (and busy season stress)
- Increased opportunity for personal and professional growth
- Improved training opportunities
- Reduction in review time
- Better overall client service
With an experienced tax outsourcing provider, the firm can gain efficiencies by moving to a more "standard" office with a streamlined preparation and review process. This process will address the backlog of work during the preparation and review cycle while decreasing the turnaround time to complete tax returns.
Don't Forget About the 7216 Consent Form!
Treasury Regulation section 301.7216, a provision enacted by Congress in 1971, directly impacts the clients a firm can outsource. The AICPA goes into detail here (and has several sample consent forms available for download as a benefit of membership). In general, if your firm wants to outsource, it needs a 7216 consent form.
Even if the person preparing the return is an employee of the firm, any 1040-series tax returns prepared outside the United States require a 7216 consent form signed by the client. Although the regulation does impact entity returns, there is no requirement for an IRS approved consent form to be used. Many firms notify business clients as part of their standard engagement letters. However, we recommend that you consult with legal counsel with experience in the offshore processing of entity returns to make sure that all bases are covered.
Don't allow the 7216 consent form to become a barrier to outsourcing. Whenever possible, utilize a digital signature process - our experience is that firms who use a digital process are highly successful in getting the needed signatures. And while you're at it, consider making the consent form valid for up to ten years to eliminate obtaining consent every year.
Working with a tax outsourcing provider such as Xpitax gives you the ability to get the work done with minimal time and effort from your staff, managers, and partners. There is no need to spend time hiring, training, or managing these workers - simply send the work and get back a completed and reviewed tax return. And because your tax OS provider handles turnover, you won't have to concern yourself about potential retention issues even in the middle of tax season.