Exploding Technology’s Effect on Professional Tax Preparation Services

If I had a dime for every time a new technological breakthrough was supposed to
eliminate my livelihood, I’d have, well, a lot of dimes. Professional tax preparation
services are often viewed as a necessary evil each Spring, and technology is often
looked at as a way to eliminate the need for the added cost of engaging a professional.

We’ve been through the introduction of the PC, canned preparation software, the
internet explosion, right up through e-filing and the proliferation of various online “free”
preparation and filing services. Some may even say it dates back to the popularization
of the handheld calculator. Now, AI (Artificial Intelligence, of course) is all the craze,
and we are again faced with the threat of elimination and replacement. The thought is
that with little effort and cost, one will be able to compile, process and file an accurate
tax return in short order. And not only that, but planning ideas, advice and consulting
services will also be built into the whole process.

My firm has invested in and began to implement forms of AI assistance throughout our
overall technological platform. One example is a scanning add-on to our preparation
software that can read, organize data and populate the input screens normally requiring
manual input. Also, the research services that we use draw on AI to answer questions
posed to it, then offer suggestions, alternatives and even deliverables such as letters
and memos. Copilot is also a powerful tool for organizing and summarizing data. Some
of the processes that it can perform, and perform quickly, are hard to believe. This level
of technological advancement would have been hard to envision just a decade or two in
the past.

There is a reason that for generations the accounting profession has earned its
reputation as boring and undynamic. That is because a good deal of the tasks are just
that, necessary but mundane. The old joke is that CPA stands for “cut, paste and
assemble.” AI certainly has a place in changing the way these basic tasks are
performed. In my mind there is no doubt that AI will increasingly replace lower-level
accounting functions to a great extent. The real question is, apart from streamlining and
eliminating the mundane tasks, can it also become your trusted advisor? That trusted
advisor will know you, not just what your data tells about you.

Scanning software programs, designed to accurately read documents fed into it, are
amazingly adept at recognizing particular fields associated with specific lines on a tax return. However, without the full picture of that person’s financial life, can it really ensure completeness and tie a multiplicity of disparate items together in a meaningful manner? Will it clutter up and confuse the input by scanning and including duplicitous, frivolous and totally unnecessary items and attempt to include them in the tax return? A tax professional, even at the lowest level, can discern the proper items to include and exclude.

Remember, ultimately the tax return is a product that is being presented to the IRS, a
state revenue department or other government jurisdiction. Historically, the CPA or
other professional tax preparer has always played the important role of gatekeeper for
this information transfer between the taxpayer and the taxing authorities, no matter what
form of delivery.

Increasingly, I have used the AI function within our research service for which we
subscribe to help find planning ideas and solutions for more complex tax issues. That
technology differs from the random AI searches though Google Gemini, Chat GPT, and
other widely used AI platforms in that it draws from limited, vetted and finite sources of
data and information to research questions and formulate recommendations. As a
professionally trained tax consultant, the trust built into the known (and paid for)
systems provide a certain level of comfort in the output. However, knowing that it is
limited also shuts off a whole world of resources and potential creativity that could tend
to reduce the value of the research. Here is where the professional, be is a CPA or
other qualified individual, with years of training, experience, and most of all human
interaction can provide value to the whole process.

How you frame the question posed to the research service or AI platform will result in
vastly different outcomes. I have found that asking AI the” correct,” targeted question
coming from a place of experience will produce the best and most accurate answers
and suggestions. Inclusion of the right buzzwords and technical terms, and perhaps
more importantly the exclusion of others, produces vastly superior outcomes and avoids
mistakes and flat-out wrong or misleading advice.

So, the question remains: will AI sound the death knell for the need of a trained
professional to assist with tax planning and return preparation? Perhaps future AI
advancements can add the human touch, acquired wisdom and the necessary tact to
make the client/customer feel comfortable with what is being reported to the
government. In the meantime, I’ll be ramping up for next busy season.