Outsourced accounting for US CPA firms: what to hand over and what the IRS expects 

Outsourced accounting lets a US CPA firm hand repeatable work to trained accountants in another country, while partners and managers keep review, sign-off and client advice. It works well when the firm is clear about what goes offshore, and when it follows the IRS consent rule for tax return information.

Why do firms look offshore?

Most firms tell the same story. Busy season gets heavier, experienced staff are hard to hire, and partners end up preparing work they should be reviewing. Adding capacity offshore lets the US team spend its hours on review and on clients.

What should you hand over first?

What does Section 7216 require?

Section 7216 of the Internal Revenue Code limits how tax return preparers disclose and use return information. The regulation at 26 CFR 301.7216-3 says that if the preparer receiving the information is outside the United States, the taxpayer's consent is required before any disclosure. The consent must name the preparer and the taxpayer, specify the information, and be signed and dated before the disclosure.

Form 1040 series returns carry an extra rule. A US preparer may not obtain consent to disclose the taxpayer's SSN to a preparer outside the US, so the SSN must be redacted or masked first. The exception is where the firm uses an adequate data protection safeguard as defined by the IRS, and verifies it in the consent request. A consent that does not state its duration lasts one year from the date it was signed.

In practice, most firms add a short consent to the engagement letter, and give offshore staff access only through the firm's own systems. Your own professional and legal advisers should confirm the wording for your firm.

Where does AI fit?

AI now reads bank statements, invoices and source documents and pulls the figures into a draft, which used to take hours of typing. Someone still has to check every number and judge what looks wrong, so the accountant stays. A trained offshore accountant who uses AI daily clears far more work, with your team reviewing the result. We have built AI front desks and AI customer support, and that work taught us where AI is reliable and where a person must check it.

How does the Extended Team work for CPA firms?

Our Extended Team accountants are selected for your work, work only for your firm, and use your systems and your review process. They typically cost 65% to 80% less than hiring locally in the United States at the same level of experience, and can work night shifts in India to overlap with your day.

Tell us what is giving you headaches. If we are not the right people, we will try our best to find who is, and connect you to them.

Frequently asked questions

These are the questions CPA firm partners ask most often about outsourced accounting.