AI and tax prep: Practitioners weigh the pros and cons

First came the adding machine, then the calculator and the PC. The laptop turned accounting into a portable profession and the internet opened new horizons for research and marketing. All these innovations, whatever the initial misgivings, became useful tools — and even friends — of tax prep.

Is artificial intelligence different?

"Many manual tasks will be automated, including securing signatures, archiving documents, and inputting form data," said John Dundon, president of Taxpayer Advocacy Services in Englewood, Colorado. "Also, distilling the Tax Code down to basic terms for general understanding is expected to be more thoroughly automated."

"AI-powered tools could easily categorize and analyze transactions, identify deductible expenses, detect anomalies and simplify complex tax calculations," said Cindy Ostrager, a CPA and partner at Top 100 Firm CohnReznick in New York. "Firms and professionals using AI tools will certainly be more efficient."

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"I've been looking at AI as a tool for my practice for tasks outside of tax preparation and planning," said Manasa Nadig, an enrolled agent and owner at MN Tax and Business Services and a partner at Harris Nadig in Canton, Michigan. "AI can assist tax professionals with research and workflow. To some extent, AI may be a good tool for those who DIY their 'simple' returns."

"Until tax forms such as W-2s, 1099s from brokers and 1099s from employers become uniform, it's still hard to find software to remove staff time entering data," said Scott Kadrlik, a CPA and managing partner at Meuwissen, Flygare, Kadrlik & Associates, in Eden Prairie, Minnesota. 

"I'm not sure yet if AI can take over human knowledge and experience as far as tax advisory goes," Nadig added.

Bugs remain

Tech leaders at some big firms think that AI's ChatGPT holds promise for the profession but still has major issues that limit it to support work far from client engagements. 

Yet, "if tax pros learn the way to 'program' the AI, they can get a ton of great info … in marketing and sales materials, scripts and systems," said Dan Henn, a CPA in Rockledge, Florida. "We're not known as creative people, and this will help us save time."

AI advancements in accounting might soon be able to help companies cut costs up to 80%, with similar savings projected for employees' time on administrative tasks. Accounting professionals will supposedly be able to focus more on strategic responsibilities by automating such repetitive processes as data input, bookkeeping and financial statement preparation using AI algorithms.

The result — much as when the PC and laptop supplanted the calculator — is supposed to give accountants time for more profitable activities.

If it works.

"As of now, the problem is these applications are still in their beginning stages and there are still bugs that require you to 'supervise' them, as well as review the results carefully," said Brian Stoner, a CPA in Burbank, California. "It's too soon to just use it as a replacement for support staff [except for] extremely simple projects [and] even then need to keep your eyes on it. Think of it as a recent college grad that has no work experience."

"A good tax professional with a good tax software package will add value that clients will continue to value," said Phyllis Jo Kubey, an EA in New York.

'Scary'

Can AI get accounting right anytime soon — and what's the first harm if it can't?

"I've been articles about AI, and some of it is pretty scary," said Mary Kay Foss, a CPA in Walnut Creek, California. "You may have seen articles indicating that AI [couldn't] pass the CPA exam and that teachers are afraid that all future assigned essays will be written by AI." 

(A recent version of ChatGPT passed a practice CPA exam after failing the first one, as do about the half the people who fail on their first attempt.)

Yet, she added, tax questions posted to three AI apps came up with wrong answers because they only searched the internet and not the Internal Revenue Code. "I've seen some misleading tax articles posted on the web myself, things that start with a little kernel of truth or a provocative question and then don't really go anywhere," Foss said.

How many seasons before AI changes tax prep's work — and image?

"People tend to be lazy and try to get a bargain on goods and services. I can definitely see a quick and dirty tax prep service based on AI rather than studying the tax law," Foss said. "Could this mean that the old pro tax prep folks will become experts in trying to explain to DIYers why their AI-prepared return isn't just aggressive, it's wrong?

"I'm afraid that AI may tend to give tax preparation a bad name," she said, "and lower the public perception of what we do."