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Leaders of AI companies often argue that AI products will handle mundane tasks, freeing people up to be more productive and creative. And there are few tasks more mundane than taxes. An individual American taxpayer spends roughly 13 hours and $240 out-of-pocket costs just to prepare and file one annual tax return, according to one 2022 study—an estimated 1.15 billion hours collectively spent on tax preparation.
So it’s not surprising that tax companies have begun rolling out AI-powered tools in an effort to make filing easier. AI-powered tax software, these companies argue, can automate repetitive tasks like data entry, cull through patterns in order to find relevant tax breaks, identify potential compliance risks, and answer tricky questions that filers may have.
But like a lot in the world of artificial intelligence at the moment, the promise of AI tax tools is more compelling than the products currently available. This year, AI chatbots have given out wrong answers to straight-forward tax questions, a dangerous proposition especially for filers who depend on refunds to pay bills. Tax experts contend that taxpayers should not rely exclusively on AI tools to file this year. However, some still predict that AI will have a major impact on both the way people file and the entire tax industry in the years to come.
Read More: The 3 Most Important AI Innovations of 2023
“Building tax software in the U.S. is very complicated, tedious and requires a lot of capital and khbrknews,” says Ben Borodach, co-founder & CEO of the AI tax startup April. “AI allows us to basically 10x the rate at which we code tax law—which will allow new providers to come into the market with better products and services.”
The IRS’s Use of AI
The first way that AI is already having an impact on taxes on the Internal Revenue Service itself. The IRS is notoriously underfunded and slow to respond to individual questions about returns. In 2022, President Biden granted the IRS $80 billion…
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