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There are always trends that don’t live up to expectations. And outsourcing tax preparation has been one of those. It looked like a very good idea: send returns to India or other country where qualified, but low-cost workers could process returns and have them ready for the American office the next morning because of the time change.

Whether it always works that smoothly, I don’t know. But the expected high rate of growth for this business has never materialized because of security concerns, especially the concern of having data in hands outside of the United States.

It’s still a good idea. And while I’m not thrilled about the idea of seeing jobs exported outside this country, it’s hard to see how much less security there is for data handled in India as opposed to tax information processed anywhere on this continent.

We went through this fear with the Internet in general. Businesses were reluctant to put critical information on the Web, and that still extends to accounting data. But organizations are increasingly comfortable with doing business on the Internet.

And besides, if Social Security numbers are masked in transmissions to preparers, whether domestic or international, most returns would not be as valuable to thieves as the typical credit card or banking transmission, transmissions that few people think about much.

As to those jobs, the fact that Xpitax is applying its systems to prepare outsourced returns suggests that there is an alternative to shipping data to India. In fact, one logical thought is that there is a pool of preparers that comes with a lower cost than the staff of a typical CPA firm.

Why couldn’t  accounting firms reach an agreement with one of the tax preparation chains such as H&R Block, Jackson Hewitt or Liberty Tax, to handle the firms’ less complicated 1040s? The tax services already provide training for workings handling simpler returns, so what not expand the operations? On the surface, there would seem to be a mutual benefit. The accounting firm would get lower costs while the tax services would have a new growth sector.

It’s what’s known as a win-win.

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