Boyd Tax Advisors is 100% American Worked, Stored, and Owned. Here’s Why.

Security, Accountability, and Risk Reduction in an Outsourced Industry

---

Executive Summary

Offshore outsourcing has become increasingly common in the U.S. tax preparation industry. Many firms now send tax returns and supporting documents overseas to reduce costs and increase volume. While this approach benefits firms, it introduces additional security, regulatory, and accountability risks for clients.

When taxpayer data is accessed or processed outside the United States, it becomes harder to control, harder to protect, and harder to recover if something goes wrong. Foreign jurisdictions often lack data protection standards equivalent to U.S. law, and U.S. regulators generally have limited authority to enforce compliance abroad.

Regulators and cybersecurity experts have repeatedly identified third-party and external access as a primary source of data breaches in the tax and financial services industries. High-profile incidents involving IRS transcripts, accounting firms, and payroll processors demonstrate that expanding access beyond a firm’s direct control increases risk.

By keeping tax preparation entirely within the United States, firms can limit data access, strengthen oversight, and preserve clear legal accountability. Domestic preparation keeps taxpayer information subject to U.S. privacy laws, allows meaningful background checks and supervision, and simplifies compliance with IRS and FTC security requirements.

For taxpayers, where a return is prepared matters. U.S.-based tax preparation is not a marketing preference. It is a risk reduction decision that prioritizes security, accountability, and trust.

I. Outsourcing Benefits Firms, Not Clients

Offshore outsourcing allows tax preparation firms to reduce labor costs, increase volume, and extend operating hours. These benefits accrue almost entirely to the firm.

From the client’s perspective, outsourcing introduces additional risk without delivering corresponding value. The end product is the same tax return, but it is prepared under weaker oversight, broader data access, and reduced legal protection.

In effect, clients assume greater risk so firms can operate more cheaply.

II. Domestic Preparation Preserves Legal Protection

When tax preparation occurs entirely within the United States, taxpayer data remains subject to U.S. laws and enforcement mechanisms.

This includes:

• IRS regulatory authority
• Federal Trade Commission enforcement under the Safeguards Rule
• State privacy and consumer protection laws
• Civil remedies available in U.S. courts

Once data is accessed or processed abroad, these protections become harder to enforce. Even when U.S. firms remain technically responsible, regulators often lack jurisdiction over foreign individuals or subcontractors who handle the data.

Domestic preparation keeps all parties within the same legal framework, which materially improves accountability.

III. Data Security Improves When Fewer Parties Have Access

Every additional vendor, contractor, or remote access point increases the risk of data compromise. Offshore outsourcing expands the number of individuals and systems that touch taxpayer data, often across multiple organizations and jurisdictions.

Regulators and cybersecurity experts consistently identify third-party access as a primary source of data breaches. This pattern has been confirmed in incidents involving tax transcripts, payroll data, and accounting firm systems.¹ ²

By contrast, domestic preparation allows firms to:

• Limit access to a smaller, known group of personnel
• Enforce uniform security standards
• Monitor activity in real time
• Respond quickly to potential incidents

Reducing complexity is one of the most effective ways to reduce security risk.

IV. Oversight and Background Checks Are Stronger in the U.S.

U.S.-based firms can conduct criminal background checks, verify credentials, and enforce licensing and compliance standards. They can also immediately revoke access and impose consequences when policies are violated.

These controls are significantly weaker in offshore environments, where background screening practices vary widely and enforcement options are limited. In many cases, foreign workers are employed through subcontractors, further diluting oversight.

Domestic preparation allows firms to maintain direct supervision and meaningful control over who handles taxpayer information.

V. Offshore Outsourcing Has a Documented Risk History

The tax and financial services industries have experienced repeated data breaches involving third-party and external service providers.

Notable examples include:

• The IRS “Get Transcript” breach, which exposed taxpayer data through weaknesses in external access systems³
• Vendor-related breaches at accounting firms where attackers used third-party credentials rather than internal systems⁴
• Payroll and tax processor breaches involving unauthorized access to W-2 and Social Security data⁵

These incidents share a common theme. Risk increased when sensitive data was accessible outside a firm’s direct control.

Domestic preparation reduces reliance on external access and lowers exposure to these known failure points.

VI. Simpler Compliance, Faster Response

IRS Publication 4557 and the FTC Safeguards Rule both emphasize vendor oversight, access control, and incident response.⁶ ⁷ These requirements are inherently easier to satisfy when all preparation occurs domestically.

If an incident occurs, U.S.-based operations allow for:

• Faster investigation and containment
• Clear reporting obligations
• Direct cooperation with regulators
• Transparent communication with affected clients

Offshore arrangements complicate each of these steps and increase the likelihood of delayed or incomplete responses.

VII. Our Position on Domestic Preparation

We believe that tax preparation should prioritize client protection over operational convenience.

For that reason:

• All tax preparation and review occurs in the United States
• No foreign contractors or overseas teams access client data
• Taxpayer information is not transmitted outside U.S. jurisdiction
• Responsibility for security and compliance remains centralized

This approach is not the cheapest way to operate. It is the most responsible.

VIII. Economic Impact of Offshore Tax Preparation on the U.S. Economy

Beyond data security and compliance concerns, offshore outsourcing in tax preparation has broader economic implications for the United States economy.

Tax preparation and related accounting services have historically provided stable, middle-income professional employment across the country, including roles for enrolled agents, accountants, reviewers, administrative staff, and seasonal workers. According to the U.S. Bureau of Labor Statistics, accounting and auditing occupations represent a significant segment of the professional services workforce and contribute materially to local and regional economies.⁸

When tax preparation work is outsourced overseas, the economic value generated by that work is removed from the domestic economy. Labor costs that would otherwise circulate within U.S. communities are instead transferred abroad, primarily to reduce operating expenses and increase firm profitability.

Economic research consistently shows that offshoring professional services shifts income away from domestic labor and toward firm ownership and shareholders.⁹ While firms may realize short-term cost savings, the broader effect includes reduced domestic wage growth, fewer middle-income employment opportunities, and diminished local economic activity.

Professional services wages tend to have a high domestic multiplier effect, meaning dollars earned by U.S.-based workers are more likely to be spent locally on housing, healthcare, education, and consumer goods.¹⁰ When those wages are paid abroad, this secondary economic activity is reduced, leading to lower overall domestic trade and consumption.

Over time, widespread outsourcing of professional services can weaken domestic labor markets, reduce payroll tax contributions, and shrink the pipeline of experienced professionals within the United States. These effects are particularly pronounced in industries that rely on seasonal or geographically distributed employment, such as tax preparation.

By contrast, maintaining U.S.-based tax preparation supports domestic employment, sustains professional career paths, and reinforces local economic activity. Keeping this work onshore ensures that the economic benefits of tax compliance services remain within the U.S. economy rather than being extracted and redistributed abroad.

For clients who value not only data security but also economic responsibility, choosing domestic tax preparation supports a stronger and more resilient U.S. professional services sector.

IX. Conclusion

Offshore outsourcing may be common, but it is not risk neutral. It increases exposure, weakens accountability, and places sensitive taxpayer data beyond the reach of meaningful enforcement.

Domestic tax preparation provides stronger legal protection, tighter security control, and clearer responsibility. For clients who value privacy, accountability, and risk reduction, where their tax return is prepared matters.

Footnotes

1. Internal Revenue Service, Publication 4557: Safeguarding Taxpayer Data (Rev. 2023).
2. Federal Trade Commission, Standards for Safeguarding Customer Information, 16 C.F.R. Part 314.
3. Treasury Inspector General for Tax Administration, Interim Results of the IRS’s Efforts to Prevent, Detect, and Resolve Identity Theft (2016).
4. U.S. Government Accountability Office, Cybersecurity and Third-Party Risk Management Findings.
5. Federal Bureau of Investigation, Public Service Announcements on W-2 and Payroll Data Breaches.
6. Internal Revenue Service, Written Information Security Plan Requirements for Tax Professionals.
7. Federal Trade Commission, Safeguards Rule Compliance Guidance.
8. U.S. Bureau of Labor Statistics, Occupational Employment and Wage Statistics: Accountants and Auditors.
9. Congressional Research Service, Offshoring and Outsourcing: Economic Implications for the United States.
10. U.S. Bureau of Economic Analysis, Industry Economic Accounts and Employment Multipliers.