“It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.” – Charles Darwin
Well, AI has invaded the realm of tax filing. It was only a matter of time, I suppose. Companies like TurboTax, H&R Block, and QuickBooks have their own AI-powered assistants designed to help you file your taxes.
AI isn’t a bad helper with taxes, per se. But don’t make it your sole tax preparer. When AI tools take the lead in the return preparation process, things can become inefficient at best and dangerous at worst.
I’m not saying this here simply to be the bad cop. But as the tax pro in your corner, I aim to help you make informed decisions on all things tax-related and to shield you from any potential threats.
It’s a role I don’t take lightly – which is why I want to take the time to point out a few specific ways using AI for your taxes could cost you.
1. Using AI for taxes: you can be led astray.
Tax laws change… ALL. THE. TIME. And AI tax assistant software updates don’t always incorporate the latest IRS rulings or temporary provisions right away. Which means you’ll likely end up needing to file an amended return.
AI assistants tend to focus primarily on federal-level tax regulations, leaving you fuzzy on your state-specific requirements.
But don’t just take my word for it.
As a real-world example, both TurboTax’s and H&R Block’s AI assistants steered Washington Post columnist Geoffrey A. Fowler wrong when he asked how his daughter, who was attending college out of state, should file taxes. Both assistants spewed irrelevant advice because they couldn’t comprehend the nuances of inter-state filing rules.
2. Using AI for taxes: you’ll miss out on credits and deductions.
The problem lies herein — AI assistants use highly generic questionnaires to get to know you. They can’t ask questions that are targeted enough to fully understand the nuances of your situation.
The outcome? You’ll likely miss out on credits that a human tax pro would have thought to uncover for you.
Where AI tools can go awry…
– Misinterpreting the documentation you give them for claiming deductions
– Failing to clarify differences between two similar credits with highly nuanced rules
– Not knowing how to advise you on which credit or deduction would give you the biggest benefit
AI’s approach is often generalized and surface-level with credits and deductions. But your taxes are usually complex and nuanced. And your credit/deduction approach should account for your unique situation and needs.
3. Using AI for taxes: you don’t get IRS protection.
If you use AI for taxes, you do so at your own risk. AI assistants could potentially increase your possibility of an audit with missteps and wrong guidance… AND they won’t be able to help you should that happen.
In the same case I mentioned earlier, the AI assistant confidently recommended an incorrect filing status to Fowler – a sure way to bring the IRS knocking on your door.
Besides being flat-out wrong at times, AI assistants also aren’t good at spotting audit triggers on your return. For example: A really common audit flag is claiming huge charitable deductions relative to your income. AI assistants will simply prompt you to enter your donation amount and send you on your merry way, failing to warn you about this.
Misclassification of income and expenses, submitting the wrong documents for claiming a credit or deduction, and mishandling side gig income are all mistakes in this same vein. These are easy to make and have costly consequences … all without AI cautioning you against them.
Then, if you DO end up getting audited, the AI assistant won’t be there to help represent or guide you. This is where, when you use a trusted, HUMAN tax professional, you’ll get guidance on your options and help to find the best way to a resolution with the IRS.
All that said, there might be a time in the future when AI could be able to do all this for you. Who knows? Technology increases at a rapid pace.
What is important is this: when you ask a question of AI, your question gets stored, and – according to the answer I received when just asked AI a minute ago, your question “is used to improve the model’s ability to respond to future queries; essentially, your questions become part of the training data for the AI, allowing it to learn and generate better answers over time…” They claim that they can de-personalize the data, but it has to be personalized before it is de-personalized.
It also helps that we know your back-story. When we have prepared your returns for years, and we know your specific situation, we can provide you with a much better answer. The answer you get from AI is based only on the question, and not based on your history, unless you want to take the time to write your life story into the question, and to have that story to get stored “to improve the model’s ability to respond to future queries… and ”beome part of the training data for AI….”
We know that back-story. For some of you, it goes back 40 years.
That is why we are focusing on our Advisory Services. That is why the tax return is only part of what we provide you, in addition to our expertise and experience. That’s why we are available for advice, all year round, confidentially, as part of what we do for you.
Now that we’re in March, there’s a little more than 5 weeks to get your return prepared and submitted. Let’s get your taxes filed:
212-247-9090