Wash your hands and put your lab coat on. Today's experiment: Outsourcing an income tax return.

Outsourcing was presented to me as a cost savings alternative: wages in India are comparatively low to wages in the U.S. So, I've tried outsourcing with QuickBooks accounting and I've been pleased. Cost savings do result.

But what I discovered is that I am also saving time. And I have even less time than I do money (as for lack of money, I think that has something to do with having two teenagers and an eleven year old...)

And I can use more time very productively: marketing, meeting with my best clients, staff training, going to the beach more often, etc.

But outsourcing tax returns? Thinking out loud, it would seem that outsourcing tax returns would produce efficiency by separating data management (1099's, K-1's, organizers) from data input (I'll be using Lacerte in our experiment) from providing a great service and doing great work (what CPA's do).

So, here we go! I started with outsourcing first.My client's tax return is on extension.He does a great job of completing his organizer.And he gives me all of his 1099's and K-1's and so on. His tax return is average in terms of complexity, and average in terms of how long it should take to do. He pays us $1,000 for his tax return.

I first electronically sent my client's 2005 data file to the Chartered Accountant in India, so she could start from where I'm starting from.

Next, I organized my client's input (1099's, K-1's etc.) in the same order as these items appear on his organizer.

Third step: I scanned all of the source documents and the organizer, and I electronically transmitted same to the Chartered Accountant.COMMENT: If we go to outsourcing, I will have my clerical staff do the scanning part... they are faster than me.

Well, that was easy... 33 minutes.

So now on to doing this tax return myself. First, some background: My CPA firm is small: Four CPAs, one entry level staff, and two clerical team members. Thus, the partners do a lot of their tax returns themselves.

First, I have one of the clerical team members copy the source documents. They come back in no particular order. This took my lab assistant 6 minutes.

Then, since I'm doing this tax return myself, I follow the firm's protocol, starting with the indexing of all source documents and the organizer.We use letters (A to Z).

I first index the lower right hand corner of the organizer in red from page one ("C1") to the last page ("C22").

Next, I index each source document in the lower right hand corner in red, in order similar to where items appear on the organizer for example, "D1" through "D8" for 1099-Int's and 1099-Div's, "G1" through "G6" for my client's K-1's, "L1" through "L7" for itemized deductions, and so on.

I then reference the source number to the particular organizer page, in red. For example, for interest income of $57 from Wells Fargo, I put a "C9" (the organizer page) to the right of the $57, and on the organizer I put a "D2" to the left of the $57 (the place the number came from).

Page 1 of 4 :: First | Last :: Prev | 1 2 3 4 | Next