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Is AI Generated Tax Advice Making the Grade?

Posted by Admin Posted on June 25 2024

From smartphones to social media algorithms and virtual assistants, artificial intelligence (AI) has permeated nearly every aspect of our lives, even taxes. But advice you get from an AI chatbot may not be as good as you think it is. In reality, AI is a rapidly evolving new technology, and may not be able to provide accurate answers to your complex tax questions.

AI refers to simulation of human intelligence processes by machines, particularly computer systems. In the context of tax preparation companies, AI is utilized to automate various aspects of tax filing, including data entry, calculations, and even providing recommendations for deductions and credits based on the taxpayer’s responses to questions.

Recently, some leading tax preparation companies have taken AI a step further by providing generative AI assistants, often referred to as AI chatbots, to answer a wide variety of tax-related questions. A chatbot is a computer program designed to simulate conversation with human users. Some chatbots, such as those currently utilized by the IRS, provide users with pre-defined answers, whereas AI chatbots can generate responses based on user input and tailor replies to the specific scenario or inquiry. Generative AI chatbots continue to evolve and learn from user input and feedback.

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.

While AI can be a useful tool in streamlining the overall tax filing process, taxpayers should not 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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Source: TAS     

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