How tax preparation outsourcing works
Most outsourcing arrangements follow the same pattern. You collect the client's documents and upload them to a secure portal. The outsourcing firm prepares the return in your software or theirs. You review it, answer open questions with the client, have the client sign Form 8879 and e-file under your firm's EFIN. You stay responsible for the return as the signing preparer, so review matters as much as if you'd prepared it yourself.
The Section 7216 rules on sharing client data
Section 7216 of the tax code restricts how preparers use and disclose tax return information. For outsourcing, the rules depend on where the other preparer is:
- A preparer in the US who assists in preparing the return: the IRS says disclosure generally doesn't require the taxpayer's consent.
- A preparer outside the US: the regulations require the taxpayer's written consent before any disclosure, in the form the IRS specifies.
- Social Security numbers going abroad: for Form 1040-series returns, a US preparer generally can't get consent to send the SSN to a preparer outside the US and must redact or mask it first. The exception: consent is possible only if the SSN is disclosed through an adequate data protection safeguard as the IRS defines it, and the consent verifies those safeguards.
- A US preparer temporarily traveling abroad isn't treated as located outside the US.
Pros and cons of outsourcing
| Pros | Cons |
|---|---|
| Handle more returns in peak weeks without hiring | You still own the result and must review every return |
| Turn complex returns around faster | Client consent and data-security steps, especially offshore |
| Free your time for client meetings and growth | Per-return costs eat into your margin |
| Access to staff who know specific return types | Less control over quality and timing |
Data security when you outsource
Tax preparation firms are covered by the FTC Safeguards Rule, which requires you to choose service providers that can protect client information, put security requirements in their contracts, and monitor them. Use a secure portal, give each outsourced preparer their own login with multi-factor authentication, share only what they need, and include the outsourcing firm in your written information security plan.
Questions to ask an outsourcing provider
- Where are your preparers located? If outside the US, how do you handle Section 7216 consent and SSN redaction?
- What data security controls do you use, and will you agree to them in writing?
- What software do you work in, and can you work in mine?
- What's your turnaround time in February and March?
- How do you handle questions, errors and corrections?
- How is pricing set: per return, per form or hourly?
Alternatives to outsourcing
Outsourcing makes the most sense for established firms with more returns than staff. For a new or small office, the bottleneck is usually getting clients and running the season, not preparation capacity. Other options: seasonal preparers working under your EFIN with their own PTINs, better workflow and review steps, or a service bureau that handles software, bank enrollment, training and support so your time goes to clients.
Partner offices with us get that support with $0 upfront, plus their marketing launch done for them. You prepare and sign your own returns. See how we work.
Common questions
Can I outsource tax preparation to another country?
Yes, but you need the client's written consent before sending any tax return information to a preparer outside the US, and you generally must redact Social Security numbers unless the IRS's adequate data protection safeguard exception applies.
Do I need client consent to outsource tax preparation in the US?
Generally no. The IRS says disclosing information to another preparer who assists in preparing the return generally doesn't require the taxpayer's consent. Your data-security duties under the FTC Safeguards Rule still apply.
Who is responsible for an outsourced tax return?
You are, as the preparer who signs and files it. Review every outsourced return before the client signs Form 8879.
How much does tax preparation outsourcing cost?
Providers usually charge per return, per form or by the hour, and prices vary widely by return complexity and location. Get written quotes and compare them against your own fee per return.