A surprisingly useful tool for this year’s tax season

Something unexpected happened recently as I was filing my taxes: AI helped. It even caught an error that my human accountant missed. This was surprising because when I decided to test out a free tax return chatbot, I expected it to tell me to, I don’t know, write off my dog as a business expense and pay my IRS bill in magic beans. I can’t say it’s the first time I’ve underestimated AI’s ability to be useful in my everyday life. I made fun of this simple AI-powered family meal planning app, and several months later, it’s gotten good enough that I’m using it on a weekly basis. I used to blankly stare at ChatGPT’s empty prompt field, unable to think of anything I might want an AI to do, and now, that box is on my screen at all times as I bounce ideas off the language model, like it’s a half-useful intern. I don’t trust the AI. But I don’t ignore it, either. AI is still bad at a lot of things. I encounter hallucinations and inaccurate answers almost every time I use it, so I double-check everything, which takes time. I never believe anything I read on the internet at first glance, anyway. Still, on balance, AI is now saving me so much time and improving my workflow so much that I don’t mind. The latest AI models are getting good enough that it’s more than worth it to find ways the software can make your life easier. Fielding your most pressing tax questions is a great example of a job AI can try. The tax bots are helpful — and pretty restrained For the 2023 tax year, both TurboTax and H&R Block launched AI-powered chatbots to help customers file their taxes. The tools did not impress Washington Post tech columnist Geoffrey Fowler, who called the chatbots “unhelpful” and, more to the point, “awful.” The companies rolled out the tools before they were finished, and they served up plenty of “bad advice,” Fowler said in a review last spring. I believe him, but I also had a different experience testing the tools this time around. After last year’s reported goof-ups, TurboTax and H&R Block updated their tax bots. They appear to be less bad at first glance. Compared to what I know about the original iterations, the second-generation chatbots seem more low-key and less error-prone. When I asked them really hard questions, they referred me back to help documents or to a human agent. You might think of the chatbots as a coach. They’re not going to do your taxes, and they’re not supposed to give you inaccurate information. But they are designed to make the process feel less stressful, according to Heather Watts, senior vice president of H&R Block’s DIY tax business. “What we’ve heard from feedback from users who’ve used it,” Watts told me, “is it’s just giving them that confidence that what they’re doing is accurate, and they feel good about, ultimately, the outcome of their tax refund.” Both TurboTax and H&R Block power their chatbots with proprietary large language models (LLM), trained on the tax code and their internal help documents. This should, in theory, keep the chatbots from drifting too far from dependable information and already-vetted answers to questions. When I asked H&R Block’s AI Tax Assist software specific questions about itemized deductions or the child tax credit, I got clear, bullet-pointed responses that often didn’t directly answer the question but rather provided generalized information. TurboTax’s AI assistant answered some questions but was quick to refer me to help articles or a live human when the questions got more complicated — which is why I describe them as low-key. They’re generally pretty restrained and conservative in their willingness to give actual advice. They’re not trying too hard to impress you, so they don’t fail too hard either. “They’re still not great in very complex situations, and I think that will take some time,” said Subodha Kumar, a professor at the Fox School of Business at Temple University. “But they have become very good with simpler cases.” Which is not to say these AI chatbots can never be wrong. If these bots give you bad advice — and they gave Fowler from the Washington Post plenty of it last year — your tax return could get flagged by the government and require an amendment. It could cause some unnecessary stress, at best, and at worst, cost you some money. Both TurboTax and H&R Block guarantee accuracy in your finalized tax return. Both companies also tucked access to their chatbots away in the software’s help menu, a couple clicks away from the form where you input your financial info. That leads me to believe that people who find them know what they’re getting themselves into. And people do seem to be discovering and using these tools. TurboTax told me that while only 15 percent of its customers’ questions were answered by AI in 2024, that number has grown to 65 percent this year. There are clear disclaimers about the need to proceed with caution on both platforms. A warning label does not make any product safe, but at least it signals something to the user. In this case, you should review all answers the AI provides. AI is the past and future of accounting The tax world is not new to AI. For years, accounting firms and tech companies alike have been incorporating AI tools to automate and streamline the tax-filing process. TurboTax and H&R Block have already been using AI in the background to give personalized deduction recommendations and to read uploaded documents, including W2s, in order to fill out forms more quickly. Both companies also told me they’re using AI to help check the accuracy of tax returns in real time. These kinds of workflows aren’t unique to the tax prep giants. In fact, AI is making everything faster through automation across the accounting industry. “We use a lot of automations to help save us time,” said Anthony Drozd, the operations manager at Sargent CPAs, a New York-based accounting firm. “If I had to make an educated guess, I would say we’ve saved about 20 percent of our time with automations that wouldn’t have been possible without AI help.” The next wave of AI technology, known as agentic AI, could allow the technology to not only recall information and create content but actually carry out tasks. In other words, AI isn’t currently doing your taxes. But companies like TurboTax and H&R Block are slowly training their models to do more by watching you do your taxes, so that it can automate the process more in the future, and save time and money. We don’t know if that agentic AI future will come to pass. In the meantime, some experts think that these AI chatbots can do more harm than good. Even if TurboTax and H&R Block have improved their models, AI chatbots are an unwelcome intermediary between someone looking for accurate information and that information in its original, vetted form, according to Emily M. Bender, a linguistics professor at the University of Washington and the co-author of The AI Con. “You end up with something that looks like a cost-cutting measure or looks like a convenient shortcut, and at the same time, it devalues the work of the people who actually do that stuff,” Bender said. Indeed, some in the tax industry are leaning away from the chatbot approach and appealing to the demand for a personal touch. Ernst & Young, for instance, advertises its lack of a chatbot as a reason to pay for its services over the competitors. Taxes are stressful, so why worry about the reliability of the advice you got from an AI chatbot, which is effectively just a sophisticated autocomplete software program. The thing my accountant had missed was no big deal. It ended up not affecting my return this year, but my accountant later told me he was glad I flagged it. And I was glad to have a human there to help me feel a little less scared about tax season. A version of this story was also published in the User Friendly newsletter. Sign up here so you don’t miss the next one!

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A surprisingly useful tool for this year’s tax season