AI has taken the world by storm since OpenAI released a demo of ChatGPT in late November 2022. The leap in capabilities was shocking, compelling industries and individuals alike to take AI seriously and explore its potential.
Just over two years later, ChatGPT has continued to evolve and improve. Meanwhile, other companies like Meta and Google have joined the AI race with their own large language models (LLMs).
But what do all of these rapid AI advancements mean for tax season? While AI can’t fully handle your taxes yet, it’s helping to make the process more efficient.
How Are Tax Products Incorporating AI?
Recent AI advancements have already begun to impact tax filing.
“AI is now being used for automated tax calculations, identifying deductions and reducing potential errors, which is reshaping the tax filing landscape,” Rachel Richards, certified public accountant and head of tax at Gelt, wrote in an email.
She explained that many machine learning models can now analyze endless financial data to uncover tax-saving opportunities, while at the same time, AI chatbots can provide instant guidance for taxpayers.
H&R Block is a great example of an early AI adopter. The long-standing tax preparation company has launched an AI assistant, AI Tax Assist, with its paid DIY product offerings.
“This innovative tool leverages H&R Block’s 70 years of trusted tax expertise and generative AI technology to streamline the tax preparation process for individuals, the self-employed and small business owners,” Chris Linderwell, vice president of digital product management for consumer tax products at H&R Block, wrote in an email.
The tool uses data from H&R Block, The Tax Institute and the experience of over 60,000 tax professionals across 9,000 offices to answer U.S. and state tax law questions. “Clients can ask unlimited questions and revisit previous threads while preparing their return,” Linderwell said.
[See: Answers to 15 Common Tax Questions]
Other Ways AI Is Playing a Part in Tax Season
AI is also transforming tax season beyond just the American tax-filing experience.
Tax preparation companies can use AI to support other areas of their businesses. Linderwell explained that H&R Block has done extensive discovery work to determine how it can unlock the power of AI for business transformation, including content generation, SEO, operational efficiencies and more.?
Additionally, the IRS is turning to AI to improve efficiency.
“The IRS is leveraging sophisticated algorithms to identify potential tax evasion and fraud. Moreover, AI’s speed and efficiency enable the IRS to analyze a significantly larger volume of tax returns than previously possible,” Robert Lee, associate professor of accounting at the Pepperdine Graziadio Business School, wrote in an email.
Risks vs. Benefits of AI-Assisted Tax Filing
While AI can offer many potential benefits for tax filing, such as increased efficiency and real-time assistance, it’s not without risks. AI has been known to make mistakes and presents some security risks, especially when handling the sensitive information involved with taxes.
Linderwell said it’s essential to acknowledge the need to ensure accuracy, privacy and security throughout the process.
“At H&R Block, we take these risks seriously and have implemented measures to ensure that AI Tax Assist is developed with accurate information from trustworthy sources and is built with privacy and security in mind,” he said.
Further, the company has human tax professionals available to ensure a balanced approach that utilizes human expertise and AI’s power.
Richards also noted that AI has been seen struggling with complex financial situations and isn’t immune to errors.
“A key risk for users is over-reliance on AI. Users may assume AI advice is correct even without verifying independently or providing full context. While AI is becoming a more powerful tax tool, professional oversight is still needed to ensure compliance and accuracy,” she said.
And Lee pointed out that the tax code is not a black-and-white system.
“Unless the tax code undergoes substantial simplification, human review and professional judgment will continue to be essential components of tax reporting,” he said.
[How to Find a Reputable Tax Preparer Near You]
What Does the Future Hold for Tax Prep and AI?
With AI rapidly improving, what might the future hold?
Linderwell thinks the future of tax prep with AI holds immense potential.
“We anticipate that AI will continue to simplify the tax-filing experience by providing more tailored explanations of a client’s tax situation, personalized advice on maximizing tax outcomes and expanding self-help experiences when clients get stuck,” he said.
Richards predicts that filing will become increasingly automated and that we may shift our thinking about taxes.
“AI will be handling everything from document collection to final submission. It is being used to shift the traditional concept of waiting until ‘tax season’ to think about your taxes to a more dynamic, ongoing approach,” she said.
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Update 03/24/25: This story was published at an earlier date and has been updated with new information.
