Can I Rely On AI to File My Taxes?
- Taylor Perry
- 2 days ago
- 4 min read
Updated: 1 day ago
Not so long ago, AI, or artificial intelligence, was largely a fictional concept associated with sci-fi films and novels set in some imagined, distant future; these days, its presence has permeated our daily lives so thoroughly that to some, it almost feels natural. As the capabilities of AI have expanded, users have begun to utilize it for increasingly complex tasks. Today, we are posed with a few questions–how AI can assist with tax preparation, how well it does so, and how it can be most wisely used, if at all.
Types & Uses of AI
In order to understand the benefits and risks of using AI, let’s take a look at how AI can function and be utilized, particularly with regard to tax preparation.
AI: Defined
The term “AI” refers to technology that enables a computer or machine to simulate human tasks such as learning, reasoning, problem solving, and decision-making. This is accomplished via “machine learning,” whereby AI systems learn to make predictions and decisions based on vast amounts of data.
There are many subtypes of AI; commonly encountered forms include Traditional AI, Predictive AI, Conversational AI, and Generative AI.
Traditional AI
Also called “narrow” or “weak” AI, Traditional AI functions based on specific, pre-defined rules. It is commonly used to automate workflows and streamline repetitive processes. In tax preparation, Traditional AI may be used to automatically extract information from W-2 or 1099 forms, categorize transactions, generate financial reports, and more.
Predictive AI
Predictive AI forecasts future outcomes by analyzing existing data and trends. Predictive AI may be used to predict potential flags for an IRS audit based on anomalous data, allowing tax preparers to identify problematic deductions or recordkeeping errors. Predictive AI can also help taxpayers to make important financial decisions by predicting various potential tax implications based on data input.
Conversational AI
Conversational AI mimics human conversations by processing and responding to language using human-like speech. Examples of Conversational AI usage include voice assistants such as Siri or Alexa, customer support chatbots, and the automated voice that answers when you call a customer service line.
Generative AI
When you hear the term “AI” in conversation, it is typically Generative AI that is being discussed. This form of AI doesn’t just analyze, extract, or predict data–it uses massive datasets and complex processes to create new content altogether. Historically used to analyze numerical data, generative AI has become ubiquitous and is used in many different applications, often in tandem with other forms of AI, such as chatbots that can generate unique speech phrases rather than sticking to a scripted series of responses.
Generative AI is commonly used for research purposes via applications like ChatGPT or Claude AI. Also called “gen AI,” this AI subtype can create original content including text, images, video, and audio; in tax preparation, it is useful not only for research, but also for generating report summaries and other communications.
Though powerful and useful in many contexts, Generative AI is controversial due to its effects on humans and the environment; due to the massive amounts of power needed to train and run these AI models, using Generative AI consumes a great deal of electricity, leading to increased carbon emissions and a great deal of water usage.
Limitations of AI in Tax Preparation
These days, AI tools are available to tax professionals and laymen alike, but before you file a return using AI, it’s important to be aware of the risks.
Due to the complexity and nuances of U.S. tax law, relying solely on AI to research and file your tax return could land you in hot water; generative AI is particularly notorious for “hallucinating” inaccurate information. United States tax codes are regularly changed and updated, making it challenging for AI models to consistently provide correct and up-to-date tax information.
According to one tech reporter, chatbots touted as “AI Assistants” by two popular tax preparation companies provided incorrect or unhelpful answers to tax-related questions up to 50% of the time. After the companies were presented with this data and attempted to correct the issue, the chatbots continued to answer inaccurately 25% of the time.
Another significant risk when it comes to AI tax preparation relates to the sensitive personal data necessary to complete a return. Every time you talk to a public AI chatbot such as ChatGPT, Gemini, or Claude, you are handing over information to a massive database that collects and stores user data, which is then used to continue training the AI model. This means that providing sensitive personal information to these chatbots leaves users vulnerable to incidents of fraud or identity theft, as their data is at risk of being accessed by humans or being regurgitated to other users through continued data training. Due to this risk, public AI chatbots should only be used for general research purposes–not for specific queries using sensitive information.
AI & Taxes: Best Practices
If you are set on using AI to assist with filing your taxes, there are a few things to keep in mind to protect yourself, your data, and the accuracy of your tax return.
AI can certainly streamline tax preparation by automating document intake, completing complex calculations, assisting with research, and more, but AI should never be used as a final filer; any tax advice provided by AI tools should be treated as general information, and output from AI automations and calculations should be regularly and thoroughly checked for accuracy.
Be sure to only use secured, certified tax preparation software with personal data protections in place; never input sensitive data such as your Social Security number or bank account information into a public AI chatbot such as ChatGPT.
Taxpayers with complex financial situations, such as self-employed individuals or those with multiple investments or foreign accounts, would be wise to rely on a certified public accountant rather than AI for their tax preparation needs.
Remember: AI is a tool–not a qualified professional. Taxpayers remain legally responsible for the accuracy of their own tax filings–even if provided with faulty information by ChatGPT or a tax platform’s proprietary chatbot. If the IRS comes knocking, “AI made me do it” will not be accepted as a valid legal defense; additional liability, interest, and penalties will be assessed on any incorrect information input on your tax return that was incorrectly provided by AI.
When in doubt, give a trusted CPA a call; let them handle your tax situation and deal with the IRS or state on your behalf, should any issues arise.
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