Artificial Intelligence In Your Tax Practice

Artificial Intelligence In Your Tax Practice

Artificial Intelligence In Your Tax Practice

Much has been written and said about artificial intelligence (AI) recently – and for good reason! AI is one of today’s hottest topics because of the promise it brings to businesses and individuals alike. Recent improvements in one form of AI – generative AI – have raised everyone’s awareness of the potential of tools such as ChatGPT and Google’s Bard. Although we are years away from being able to take advantage of artificial general intelligence, opportunities exist today to use AI in everyday business situations, such as tax practices. Read on, and in this article, you will learn more about how tax practices can capitalize on AI to improve efficiency and accuracy.

Generative AI And Artificial Intelligence

Before considering AI in the tax practice, we must understand the difference between generative AI and artificial general intelligence. Tools such as ChatGPT and Bard fall into the generative AI realm. This class of AI allows users to use their technology to generate new content, conduct research, and assist in product development. Generative AI tools rely on large language models (LLMs), massive data sets often containing over 100 billion parameters. These LLMs are “trained” to recognize the relationships between words, the context in which words appear, and the sentiment of the user’s request (celebratory, factual, sympathetic, etc.) Tools such as ChatGPT and Bard are leading examples of today’s class of generative AI tools.

On the other hand, artificial general intelligence is a form of AI in which computers may be able to reason, sympathize, solve problems, and generally mimic human behavior. Let’s be clear – most experts in this field believe we are many years – perhaps even decades – away from artificial general intelligence materializing, if it ever materializes. But, if it does appear, it will undoubtedly and profoundly affect how humans live and work.

How You Can Use AI In Your Tax Practice

Now that we understand a little about AI fundamentals let us return to the topic of using AI in a tax practice. All practitioners seek to overcome challenges associated with managing a rewarding tax practice. Among these challenges are staffing, seasonal workloads, increasing complexity, client satisfaction, and competition, to name a few. Fortunately, generative AI offers tangible opportunities to help you overcome these challenges. 

Automated Data Entry

The most prominent example of using artificial intelligence in your tax practice is automated data entry. Although not a new concept, automated data entry has matured in recent years to the point that it is a powerful AI-based technology. Virtually every major tax software publisher offers automated data entry options for their tax preparation software. Of course, firms that use this form of AI realize the benefit of saving time because team members are no longer required to input data manually; they also will likely find that the error rate associated with ingesting data declines.

Error Detection

As mentioned in the preceding paragraph, automated data entry tools help to reduce errors associated with data entry. But AI-driven error detection shows up in other ways. For example, AI-driven algorithms can analyze returns and identify errors or items that do not align with expectations. For example, for a taxpayer who receives multiple W-2 forms, embedded rules in the tax software can identify situations where the taxpayer overpaid FICA taxes and deserves credit. Of course, there is no substitute for human expertise and judgment; however, these rules can enable practitioners to complete tax return reviews much more quickly than if the reviews are entirely manual.

Tax Planning

As AI matures, look for AI-based tools to assist with tax planning. For example, tools available today, such as Corvee, allow practitioners to analyze quickly competing alternatives for tax strategies. To illustrate, you could use Corvee to quickly and easily compare the tax implications associated with a form of entity election (S corporation vs. C corporation, for example.) Likewise, Corvee can assist with gathering all the data needed to prepare a client’s return by generating “smart” questionnaires that omit unnecessary questions and ask for additional details when necessary. 

Research And Communication

You can also use today’s AI tools to perform tax research. For example, suppose a team member needs to respond to an IRS notice. For example, suppose you have a client who receives a CP-12 notice from the Internal Revenue Service. You could use a generative AI tool such as ChatGPT or Bard to generate a response on behalf of your client. If you have a ChatGPT or Bard account, enter the phrase “Respond to IRS CP-12” in your service, and you may be pleasantly surprised at the result!   

Foundational AI Options To Improve Tax Practice And Efficency

Indeed, other AI options exist today – and will expand in the future – to improve efficiency in businesses of all types, including tax practices. For example, tools like Grammarly are extremely useful in helping to improve the quality of writing memos, emails, blog posts, etc.

Further, newer tools such as Microsoft’s Copilot and Google’s Duet are rolling out to assist with creating content and managing everyday tasks. For example, if desired, you can have Copilot analyze the emails in your Inbox and prepare responses for you automatically. Likewise, you can instruct Copilot to prepare a PowerPoint presentation from an existing Word document for a client. Further, suppose you and a client participate in a Teams meeting; in that case, Copilot can summarize the key discussion points from the meeting. 


AI is here to stay, and the benefits can be enormous for tax practitioners who use it responsibly. Improved efficiency, accuracy, and client service are all possible if you implement artificial intelligence in your tax practice! And, with almost nonexistent barriers to entry, what’s holding you back?


You can learn more about AI by participating in a K2 Enterprises training session. Click here for more info. 

Additionally, you can learn more about AI in tax practices by participating in any of the following Federal Tax Updates and California Tax Updates presented by Western CPE. During these events, K2 Enterprises instructors will present sessions on AI and automation in tax practices.