Tax training with a culture lesson

Workforce, June, 2003 by Sheila Anne Feeney

Training number-crunchers half a world away in Bangalore, India, to prepare U.S. tax returns that baffle even math-adept Americans begins with a crash course in cultural awareness. At Outsource Partners International, the largest business process outsource firm devoted to finance, accounting, and co-sourcing tax work, Indian accountants pore over Internal Revenue Service tax manuals and the U.S. tax code. They plumb the logic behind sophisticated software before plunging into the 1040s, 1065s, and 1 120s glowing on the consoles before them. And along the way they are steeped in American culture.

"You have to train them in the social culture and the economic culture before you can go to the taxes," says Meera Harpanhalli, director of tax services at OPI, the only U.S. tax co-sourcing firm to own and operate its own processing center in India. While the organization provides financial work for a variety of U.S. companies, most of its tax preparation is done at the behest of accounting firms hired by individuals, businesses, and nonprofit organizations to do their taxes. (Taxpayers typically have no idea that their returns are prepared abroad.) OPI, which has 650 employees worldwide, expects to double its labor force of 325 employees now working in Bangalore by this time next year.

That means a lot of employee training. Tax preparers are usually chartered accountants whose first language is Tamil or Kannada, but who were educated in English. New recruits--40 of whom recently were selected from 1,200 applications generated by an ad in The Times of India--undergo an initial two weeks of paid training. That is followed by periodic brushups as U.S. tax policies change, new clients are acquired, or demands for new services occur.

Answers to the questions raised during training shatter the Indians' misconceptions about the far more affluent United States, which is farming out an increasingly diverse array of jobs to their country "Income from Social Security" evokes perplexity, as there is no such system in India, Students also question the reason behind education tax credits, another foreign concept. U.S. parents "need to get a break," Harpanhalli tells them. "No education in India is free," she says, but school costs are modest compared to those here.

During training, Indians who are perplexed by the ability to deduct medical expenses exceeding 7.5 percent of an adjusted gross income are astonished when they come to realize the stratospherically high cost of even routine medical care in the United States. "In India, you just walk into an office. "Your expenses are much, much cheaper," and there are no insurance nightmares, Harpanhalli says.

In the course of comprehending what constitutes an allowable deduction, the chartered accountants also "learn about geography and different climatic conditions of certain states. In North Carolina, for example, there may be insurance deductions because the house collapsed or the roof fell off due to a hurricane."

Indian accountants have an inherent advantage in preparing American taxes, contends Harpanhalli, herself a CPA, because they are motivated learners who were weaned on the equally complex Indian tax code.

In India, where 25 percent of the population lives below the poverty line, the company's chartered accountants earn $18,000 to $20,000 a year, about a third to a half of what their American counterparts make, says Keith Aiphonso, OPI business development manager. American accounting firms that hire OPI typically save 50 percent in labor costs, but also appreciate liberating their American employees from rote and mundane tasks to pursue more complicated, compelling, and profitable work, says Alphonso.

Accountants in the American firms who hire OPI do the final review of the tax returns and sign them. As such, they are also on the spot if the IRS sniffs anything suspicious. OPI accountants, however, who can quote American tax code as if it were scripture, are also instructed to alert their American employers to anything that smells even remotely of Enron-like accounting practices. The software programs, Harpanhalli explains, have a notes section. There have been occasions on which the Indian accountants have strongly advised U.S. CPAs to "please go over these numbers again."