BTB Stock Income Tax Updates

Using Artificial Intelligence in Your Tax Practice – Use Caution

The prevalence of artificial intelligence clearly has a place in today’s society and its use is becoming more widespread in a variety of industries. When it comes to finding answers to complex tax questions, how reliant can tax professionals be?

According to National Taxpayer Advocate Erin Collins, customers of major tax preparation companies should take tax advice from artificial intelligence chatbots with a grain of salt due to inconsistencies with sourcing accurate information involving complex tax situations.

The knowledge base for AI assistants used by tax preparation companies is generally comprised of current tax code, regulations, and IRS guidance, as well as information from each company’s own tax preparation experience and is reviewed by accountants and tax law experts. Despite efforts to ensure accuracy, these AI assistants may encounter difficulties interpreting complex tax laws correctly or considering unique circumstances that could impact a taxpayer’s return. As a result, taxpayers should not solely rely on AI-generated tax advice.

A recent informal review by the Washington Post found that two of the leading tax preparation companies’ chatbots provided inaccurate or irrelevant responses up to 50 percent of the time when initially asked 16 complex tax questions. Both companies include disclaimers on their sites advising the assistants are still learning and users should verify the information provided.

The results of this informal review should be somewhat concerning for taxpayers who aren’t tax savvy. Reliance on the answers provided could certainly result in an incorrect return. For tax professionals who are contemplating using AI for more complex questions should always double check the accuracy of the answer provided. It is uncertain at this point whether relying on AI when taking a position on a tax return could result in taking an unreasonable basis and subsequently challenged by the IRS, resulting in potential penalties.

While AI can be a useful tool in streamlining the overall tax filing process, neither tax professionals nor taxpayers should rely on AI-generated responses to complex tax questions. Taxpayers should be vigilant when using tax preparation software and ensure they understand the limitations of AI-generated advice. Taxpayers are ultimately responsible for the information reported on their tax returns. Therefore, it is essential to review all information carefully, verify calculations, and seek assistance from qualified professionals if needed to ensure compliance with tax laws and regulations.

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