There has been a lot of discussion about whether or not the jobs being outsourced overseas are really jobs that “matter”. One of the most disturbing trends in outsourcing (in my opinion) is outsourcing our IRS tax returns to India for processing. These non-US-citizens have access to our most sensitive personal information; Social Security number, employer, earnings, etc. Of course it's cheaper, but is it safe?! It doesn't give me a warm, fuzzy feeling.


And the IRS is not the only US Federal agency using other countries to do the government’s work. The DoD and yes, even Homeland Security outsource jobs. There is enough concern that Congress is attempting to limit the number of Federal jobs that can be outsourced. WA Post

Granted, a lot of government outsourcing is within the country (private contractors in the military, companies like Halliburton), but some of it is sent to offshore companies who receive Dod (i.e., us, the taxpayers) monies. For instance, border patrol uniforms are outsourced to a private company, who in turn outsources the actual making of the garments overseas.

Even the Department of Homeland Security outsources! One contract ranges from $10M to $10B. My thoughts on that can be summed up in this response to a CNN broadcast:

In searching for sources, I found this interesting tidbit regarding IT security:

Other items of interest regarding outsourcing:
News Factor
FCW

Is this a proper use of US taxpayers’ money?

More importantly, is it safe? What dangers might there be in this rapidly expanding practice?

In the most general terms, outsourcing (or privatizing) certain government functions improves competition and lowers prices, saving taxpayer money, and is a good thing.

Without debating the relative merits of privatizing certain functions, it's safe to say that the majority of people agree that certain functions (e.g. legislation, courts, law enforcement, defence) should not be privatized.

Conversely, many functions lend themselves to outsourcing, particularly the purchase of capital (buildings, vehicles, computers, uniforms, tools, and other equipment) so much so that it goes on without much interest from anyone.

Some of the outsourced equipment purchases (jet fighters for one) really ought be made in the US. Some (uniforms) don't really matter, at least for national security purchases. Requiring federal uniforms to be made in the US is really a subsidy for US garmet makers. However as subsidies go, it's one of the more defensible ones.

As far as US tax returns going overseas for processing, I agree, this is a bad thing. It really is an indication of how messed up our tax system is, and while it should be stopped, the real solution is to simplify the tax system. Was the CPA mentioned an IRS employee or was he sending his private practice's customer's returns overseas for preparation? If so, I have no real problem with it, though I hope his customers are well informed about the process...I wouldn't personally be participating in it.

Well, I can empathise - but is an Indian you don't know and will never meet less trustworthy or honest than a US citizen you don't know and will never meet?

I don't really see how anyone could use your tax return for their own gain, other than knowing how much tax you pay - which is probably less than fascinating to an Indian working in some centre processing thousands of tax returns a month.


But generally, doesn't the government have a duty to use taxpayers money as cost effectively as possible? If something can be bought for more cheaply from abroad, then why not buy it from abroad?

I agree that tax returns are far from fascinating, unless you have a criminal mentality. A tax return has all the information a person needs for identify theft. Once you have someone's social security number, you have their LIFE...and the capacity to ruin it. Identity theft is one of the fastest rising crimes today.

Ah, I see...I didn't consider that.

Well, okay, but then - aren't you more at risk of identity theft from an American than an Indian? Purely because an American lives in America, so could access your bank or whatever, whereas some guy in Mumbai might not be able to do much with your identity.

But yes, I can see that might not be very comforting.....(Indian firms are generally very professional though and have very high security standards).

As sad as it is to say, I would have to agree. An IRS employee earning a menial income is probably far more likely to steal an identity that he/she can use than someone thousands of miles away. I understand people's apprehension in outsourcing, but it is a sincere mark of capitalism and not always negative.

Personally, I wold be more concerned about someone in the US having this information, than someone outside the US, as they could do, I think, far more damage with the information. It would be much harder to dispute activities that occurred here in the US using that information, than activities that took place somewhere I clearly have never been.

Perhaps more to the point...what exactly is it about the IRS itself doing these returns that would give you a warm, fuzzy feeling? Given their perceived history of excessive actions without due process, I would think you might be glad it was indeed someone else processing these.

Further, I think there is an assumption here that these activities involve hand-processing...I don't think that is probably the case. Rather, I think these are still being computer processed...so there isn't necessarily any reason why anyone doing the processing would ever look at or have access to this information in the first place.

Not at all Hobbes. First, perhaps the employee at your local H&R Block could do as much damage as anyone from India or the Phillipines, but we have criminal laws that protect citizens in this country from that kind of abuse, as well as civil laws to recoup damages. Those laws don't apply to overseas companies or employees, as US laws aren't enforceable there.

Second, it's not like the Indian employee is going to pass himself off as John Smith, and use your information in India. He's going to take your info packet, and sell it to someone who can make forged ID's out of it, and sell those IDs back in the states.

Lastly, these activities (tax processing) do require hand processing. They may be using a computer program to calculate the taxes due, much like TurboTax or the programs used at H&R Block, or where ever, but they do require hand entry of the relevant information: Name, Address, Social Security or Federal Tax ID number, gross wages, etc. I have yet to see a program that allowed you to import this information without having to look at it to verify it.

But India has Indian laws, which cover the same misdeeds. Are you suggesting that anyone is going to outsource to a country where they felt the law, or policing was insufficient to cover the abuse of data?

That seems unlikely at best. I should imagine that an Indian jail is no pleasanter than a US one, and Indian employees no less keen to avoid going to jail.

More importantly, is it safe? What dangers might there be in this rapidly expanding practice?
This is an older article from Wired.com, and it isn't the one I wanted but it'll do for now - Outsourcing: Danger to Privacy.


The points made so far are extremely valid concerns. By shipping things overseas like tax returns, financial records and medical records you are opening yourself up to all kinds of fraud and identity theft issues.

As NiteGuy stated, often the laws preventing professionals in the US from stealing your information and using it for financial gain do not exist in foreign countries. We don't decide where we are going to do business based on whether the country has laws protecting our information or not, because many of these countries quite simply aren't that advanced in their laws yet.

The article I was looking for talked about outsourcing work to Nigeria. I think everyone should be familiar with Nigeria, home of the email scams and spam. Now do you really think your information would be protected in that kind of environment? If we can't stop spammers and scammers, how is our government going to protect your medical records, finances and identity?

Until the laws both in this country and the countries we intend to do business with evolve, this isn't a safe practice. Ask yourself one question - would you be comfortable knowing that your accountant was sending your financial records including your social security number overseas this coming April? Chances are you wouldn't be paying any less, but your accountant would be getting a better margin. If you can answer "yes" to that question, then you are far more risk tolerant than I am, and I'm not sure there is really any way I could debate this subject with you.

But only if they are caught stealing and transmitting the data to someone over in India. By the time your information has been stolen, converted to new IDs, and shipped over here, it's too late.

Your identity has been stolen, you're in a legal hell, trying to prove that the car, plasma tv, whatever wasn't purchased by you, and you have no idea where the ID theft could have possibly happened.