Onshore vs offshore tax return outsourcing: security, state tax knowledge, and who keeps the review

Most CPA and tax firms don't have a capacity problem for nine months of the year. They have one from February to April, and again before the September and October extension deadlines. Outsourcing return preparation is one of the most common ways to handle that peak. The first big decision is where the work gets done: offshore, or with US-based preparers.

This guide explains how the two models differ on data rules, state tax knowledge, review, and cost structure. It also describes the two most common offshore commercial models and where Taxfyle fits. Market examples were checked on providers' public websites on October 20, 2026. IRS rules are quoted from the Code of Federal Regulations.

Why firms outsource tax prep for busy season

A firm short on capacity for the 2027 season has three basic options:

• Hire. A year-round hire adds capacity, but the cost runs all year while the heaviest workload is compressed into a few months. Experienced preparers are also hard to find.
• Add seasonal staff. Temporary staff help, but recruiting, onboarding, and training eat into the very weeks you need them most.
• Outsource. An outside provider prepares returns, and your firm reviews and files them. Capacity flexes with volume, and your team gets time back for review, planning, and client work.

Outsourcing isn't one model, though. Offshore and onshore providers differ in ways that affect compliance, communication, and quality control.

What "offshore" usually means in this market

In US tax outsourcing, "offshore" usually means returns are prepared by teams outside the United States, commonly in India or the Philippines, while sales and account management are handled from the US. Some providers also offer "nearshore" teams in Mexico. For IRS purposes, nearshore is still outside the United States.

The main selling point of offshore delivery is unit cost. The trade-offs firms weigh are data rules, time-zone gaps, and familiarity with US state tax.

Two common offshore models

Offshore tax outsourcing is usually sold in one of two ways.

Per-return pricing

Some offshore providers advertise a flat price per individual return for CPA firms. As of October 2026, these offers can be tied to conditions such as a minimum batch of returns or a minimum commitment, and some are labeled limited-time. Before signing, ask what counts as one return, how state returns and extra schedules are treated, and what happens if your volume falls below the minimum.

Dedicated offshore staff

Other providers place dedicated offshore preparers, reviewers, or managers with US firms, billed by the hour on a part-time, full-time, or seasonal basis. Staff may be based in India, the Philippines, or Mexico. The firm directs the work, much as it would with its own employees, but the people doing it are outside the United States.

Providers in both models advertise experience with US tax software such as Drake, UltraTax CS, Lacerte, ProConnect, and CCH Axcess, along with security certifications such as SOC 2. Ask any provider for current reports rather than relying on a logo.

What onshore delivery changes

IRS §7216 consent for disclosures outside the US

Section 7216 of the Internal Revenue Code and its regulations limit how tax return preparers can use and disclose taxpayer information. Under 26 CFR 301.7216-2(c), a preparer in the US must get the taxpayer's consent under §301.7216-3 before disclosing tax return information to anyone outside the United States, including people in its own overseas office. The regulation's examples confirm the rule also applies when an outside contractor overseas only views data stored on a US server.

The consent rules are specific. Under §301.7216-3, consent to disclose must be in a separate written document, the taxpayer must receive a copy, and if no duration is stated, the consent lasts one year. The IRS's mandatory consent language is set out in Rev. Proc. 2013-14.

The SSN rule for 1040 filers

For returns in the Form 1040 series, §301.7216-3(b)(4) generally bars a US preparer from even obtaining consent to send a taxpayer's Social Security number to a preparer outside the US. The SSN must be redacted or masked. The one exception requires an "adequate data protection safeguard" as defined in IRS guidance, and the consent request must verify that safeguard. That adds steps to an offshore workflow.

What staying in the US does and doesn't change

When return information stays with preparers in the United States, these offshore-specific requirements don't apply. Domestic arrangements still have rules, though. Under §301.7216-2(d), a preparer may share return information with another US preparer to help prepare a return without consent, but generally not when the second preparer will make substantive determinations affecting the tax liability. Review your engagement letters and workflow with your own counsel, whichever model you choose.

State tax familiarity and review timing

Federal rules are the same everywhere. State and local rules aren't. US-based preparers are more likely to have hands-on experience with state conformity, apportionment, and local filings. Working in the same time zones as your reviewers can also shorten the back-and-forth on review notes during the weeks when every day counts.

Taxfyle's model in plain terms

Taxfyle's outsourcing offer is built around one idea: works in your software. You keep the client, the review, and the signature.

• US-based licensed professionals. Returns are prepared by vetted, licensed CPAs and EAs on the Taxfyle platform. They're matched to your firm's state where possible, from a pool vetted for your firm.
• Your software. Pros prepare returns in the software your firm already uses, such as Drake, UltraTax CS, Lacerte, or CCH, or on a secure virtual workstation.
• Your client and your signature. Your firm creates each job, either by answering a scoping questionnaire and uploading documents or by uploading the client's prior-year return. A Pro prepares the draft, and your firm approves it or requests changes. Authorization, e-filing, and delivery stay with your firm. Your client never sees Taxfyle.
• Individual and business returns. Prep-only and review-only jobs are both available, including Forms 1120 and 1065.
• Security. Taxfyle maintains SOC 2 Type II, ISO 27001, and ISO 27017 certifications, with optional managed virtual workstations.
• Pricing. Contract-based pricing, with volume discounts for larger contracts.

Side-by-side: offshore vs onshore outsourcing

Decision checklist for the 2027 season

Ask every provider, onshore or offshore, these questions:

1. Where will my clients' data be viewed or processed? Get country-level answers, including backup and support teams.
2. What §7216 consents will I need, and who drafts them? If any work happens outside the US, plan the consent and SSN-masking workflow before January.
3. Does the work happen in my software? Find out whether preparers work in your Drake, UltraTax, Lacerte, or CCH environment, or whether returns have to be re-entered.
4. Who keeps the review and the signature? Confirm that your firm approves every draft and handles e-filing and client delivery.
5. How are preparers vetted and licensed? Ask about credentials, state experience, and how preparers are matched to your firm.
6. What security certifications can you share? Request current SOC 2 Type II and ISO reports.
7. How does pricing flex with the season? Understand minimums, commitments, and how volume affects your contract.
8. What happens with review notes? Ask how questions and corrections move back and forth, and in what time zone.

Frequently asked questions

Is offshore tax preparation legal for US CPA firms?

Yes, as long as the firm follows the IRS §7216 rules. Under 26 CFR 301.7216-2 and -3, that means getting the taxpayer's separate written consent before disclosing return information to a preparer outside the US, and following the SSN restrictions for Form 1040-series returns.

Does domestic outsourcing require §7216 consent?

The offshore-specific consent and SSN rules don't apply when return information stays in the US. Under §301.7216-2(d), sharing information with another US preparer to help prepare a return generally doesn't require consent, but sharing it so the other preparer can make substantive determinations does. Confirm your workflow with counsel.

Will my clients know I outsource?

With Taxfyle, your client never sees Taxfyle branding. Licensed CPAs and EAs on the Taxfyle platform prepare drafts in your software, and your firm handles review, signature, e-filing, and delivery.

What tax software does Taxfyle work in?

Pros on the Taxfyle platform prepare returns in the firm's own software, such as Drake, UltraTax CS, Lacerte, or CCH, or on a secure virtual workstation.

How is Taxfyle's outsourcing priced?

Contract-based pricing, with volume discounts for larger contracts.

Plan your 2027 capacity now

Firms that sort out capacity in the fall go into busy season with fewer surprises. If you want US-based, licensed CPAs and EAs working in your software, while your firm keeps the client, the review, and the signature, talk to the Taxfyle team about the 2027 season.