CPA judgment still needed despite uptick in AI use

Many companies are now touting their artificial intelligence services that will help taxpayers and businesses streamline their tax filings next year. While most major companies are taking a more cautious, human-centered approach to ensure safe and effective use of the technology, some smaller players are jumping right in without safeguarding their clients from potential errors that could make them liable for fraud and land them with Internal Revenue Service fines and audits.  

For example, Intuit, parent company of TurboTax, Credit Karma, QuickBooks and Mailchimp, announced a partnership with Google Cloud to allow users to take a photo of their tax forms and upload it to a tax filing program to save users from manual entry. Intuit’s chief data officer Ashok Srivastava made clear its AI program is used only to assist with technical capabilities and processes rather than full reliance on AI, noting in an interview, “We don’t want to just have the machines monitoring themselves. We want humans in the loop also, and we are doing that.”

Srivastava’s counsel is welcome, though many competitors in the space aren’t taking the same approach, particularly when it comes to filing complex research and development tax credits. In fact, there’s been a concerning trend of claims made by new firms in this space claiming AI is ready to replace expert tax consultants — but their speedy “solutions” might land users with an IRS audit or hefty fines rather than tax credits.

For example, some new companies that specialize in helping businesses prepare filings for R&D tax credits are making claims that are too good to be true or at best, misleading, ranging from attacking the expertise of CPAs to downplaying the risks of IRS audits. The most egregious behavior is when these firms use an AI model that fully automates 100% — or nearly all — of the tax credit process. Other claims made by some of these startups include saying their AI technology is trained on the IRS Tax Code and will even protect taxpayers in the event of an audit. 

However, the importance of human tax professionals during the filing process cannot be overstated.  

The reality is that AI cannot replace a CPA’s judgment, discretion, and the ability to factor in context during any filing process. Businesses should be wary of AI-driven tax assistance firms making exaggerated claims. By asking the right questions and ensuring AI tools are properly vetted, CPAs help protect their clients from inaccurate and or fraudulent filings, audits and potential tax and penalty liabilities.

While AI can enhance the productivity of CPAs when processing large datasets, completing routine tasks, or identifying potential qualifying activities, it cannot replace the discretion required to determine eligibility, substantiate claims or interpret tax law. R&D tax credit calculations require careful legal and regulatory interpretation, as AI models do not have the capacity to apply case law and legal precedent to tax claims in a way that aligns with IRS expectations. 

To make matters worse, these AI-driven firms fail to mention that if their AI-generated tax advice results in an audit, their customers, not the firms themselves, are held legally liable. Do these firms also represent clients in these scenarios during court proceedings? That remains unclear.

Finally, AI can be a risk during audit preparedness too. AI-generated claims may lack the necessary documentation and substantiation required to withstand an IRS audit, leaving taxpayers exposed to financial and legal risk.

If true tax experts don’t convince you, then the IRS may. AI is a useful tool for data analysis, but it is not capable of replacing the human, expert judgement offered by tax professionals like CPAs who help clients avoid inaccurate or fraudulent returns in the first place.