I do taxes at H&R Block. Could AI tax returns replace me? For simple stuff, possibly. But not for anything even slightly complicated. I mean, taxes can get really convoluted fast. Plus, tax code is not all in one place. It’s in multiple places which are updated whenever needed.
From the IRS.
“The IRC is complex, and its sections must be read in the context of the entire Code, the Treasury Regulations, and the court decisions that interpret it.”
This means a LLM would need to slurp up tax code, Treasury regs, and court decisions continually and determine if something has changed, been revoked, or superseded. And it must do everything in the correct chronological order. Also, tax code in particular may be embedded in a larger bill, so the AI would somehow need to know what is relevant and what isn’t.
Tax pros sign the returns. Thus, we would need to double check what the AI did. No hallucinations, please! If it made something up and we miss that in our review, it’s on us. Ramifications could be serious.
For an example of the complexities, a client has foreign income exclusion and rental properties in two states. Will AI know that foreign income excluded in AGI is added back into MAGI to determine if the rentals can show a deductible loss on the return? Because claiming that loss when it shouldn’t will probably get the taxpayer an IRS letter.
Will AI know of any agreements between those two states to offset taxes paid in the other state? To do so, it would need to slurp up all state tax code too. (Good luck with OH, which some tax pros won’t do because it’s so convoluted.)
AI tax returns can’t have hallucinations, but they will. H&R Block (and other) industrial-strength tax software is maintained by teams of hundreds, updating them constantly, and testing and checking everything for errors. To my knowledge, AI is nowhere near capable of doing this.