‘Proceed with caution’ before tapping AI chatbots to file your tax return, experts warn

Nearly 1 in 5 Americans would trust ChatGPT, a popular AI chatbot from OpenAI, to review their income taxes, and 14% have used it, according to a February survey of roughly 1,000 U.S. adults from CardRates.com.

Another recent survey had similar findings, with 17% saying they have used AI for tax filing and 45% open to it for future use, a Harris Poll found.

While many experts are optimistic about the future of generative AI and taxes, filers should “proceed with caution” when using the software to file returns, said April Walker, lead manager for tax practice and ethics at the American Institute of CPAs.

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“We caution users against using ChatGPT for financial advice, as they should seek a professional instead. This activity actually goes against our usage policies,” a spokesperson from OpenAI told CNBC.

This season, taxpayers have several options for AI-powered guidance, including software like ChatGPT, along with chatbots from TurboTax, H&R Block and the IRS.

In 2022, the IRS rolled out voice and chatbots to help answer basic payment and collection notice questions. The agency has since expanded its use of AI-driven technology.

Since the January 2022 rollout, the IRS used chatbots to help more than 13 million taxpayers and helped set up about $151 million in payment agreements, the agency announced in September.

Meanwhile, TurboTax has unveiled the generative AI-powered “Intuit Assist” chatbot. The was chatbot was designed to help with software already using AI for “simplified filing” and more accurate returns, according to Karen Nolan, senior communications manager at Intuit TurboTax.

However, “AI is not completing or filing a tax return in TurboTax,” she said. “If a TurboTax filer ever has a question about their tax return, they are only a click away from a live tax expert at all times.”

H&R Block, which has used AI for years, also introduced a generative chatbot with “AI Tax Assist” this season. The tool assists the process for DIY filers and the company has instructions on the best way to use it.

“We also have a team of human testers reviewing questions and feedback daily to identify what to add and improve,” a company spokesperson said.  

Still, AI chatbots “aren’t ready for prime time,” when filing tax returns, according to Subodha Kumar, professor of statistics, operations and data science at the Fox School of Business at Temple University.

Kumar has tested AI chatbots with his students and found the software works for general tax questions, but often provides wrong answers for more specific prompts.

For example, filers may not get accurate answers to tax questions from ChatGPT because its training is “general purpose” rather than tax-specific, he said.

Plus, the data isn’t fully updated, with different knowledge cutoff dates, depending on which version of ChatGPT you’re using. The latest AI model is GPT-4 Turbo, and provides answers with context up to April 2023. That could be an issue with yearly inflation adjustments, tax changes from Congress and the IRS.

However, with models specifically trained for tax, Kumar expects a “big leap” from tax-specific AI chatbots by next season.

While experts agree that AI chatbots aren’t ready for personalized tax recommendations, there’s still a chance for education.

“I think there are opportunities to use tools like that in a generalized context,” said Michael Prinzo, managing principal of tax at CliftonLarsonAllen. “It could be an effective tool as long as personal information is protected.”

Experts warn there could be data security issues when plugging financial information into ChatGPT or other AI chatbots.

“There could be multiple types of [data] leakage,” explained Spencer Lourens, managing principal of data science, machine learning and artificial intelligence at CliftonLarsonAllen.

However, you could input a general fact pattern of possible income sources and tax breaks without including sensitive personal data and relying on the software for a specific answer.

Of course, you should always verify any information received from AI-powered chatbots by double-checking the details on the IRS website or with a tax professional, added Walker with the American Institute of CPAs.