As people with tax filing extensions prepare for the Internal Revenue Service’s October 15 deadline, and others begin to think about their returns due next April, tax prep services are touting AI tools that can help answer questions you have and help you file faster and more accurately.
H&R Block has, since December 2023, offered people filing through its online products a tool it calls AI Tax Assist, which can answer questions about tax law, particular filing situations, and using the H&R Block software itself through a chat interface similar to ChatGPT. Common subjects include deductions and credits for people with kids, issues around self-employment, and taxes on funds from retirement accounts, says Heather Watts, senior vice president of consumer tax products and support at H&R Block.
“We’ve been working feverishly over the last year to try to continue to expand the amount of content that we have within the model, in order to really help those DIYers be more confident as they’re going through the experience,” Watts says.
The AI tool only pulls answers from H&R Block’s own tax information sources, so the company can be sure the data going in is accurate. And when there’s a relevant change in tax law, H&R Block’s experts can usually get new information loaded into the AI system within 24 hours. A team at the company also reviews a sample of questions and answers given by the chatbot for accuracy every day, says Watts, with the results feeding back into updates to the technology.
H&R Block isn’t the only tax software maker harnessing artificial intelligence, as the tax prep industry looks to differentiate itself from the IRS Direct File system, which the agency just announced is expanding from 12 to 24 states for next year’s filing season. Intuit’s TurboTax can also answer questions through its Intuit Assist AI in both English and Spanish, and the software can spot potential errors and missing documents and even help quickly match users with an appropriate (human) expert if they want their taxes done for them.
And April, which provides white-label tax filing available through its fintech clients like Gusto, Chime, and Acorns, harnesses AI to let people file quickly, asking people only the questions necessary to complete their returns and answering any questions they may have. Many users are able to file using only their smartphones, and the average user can file after spending about 23 minutes in the software answering about 52 relevant questions, says CEO and cofounder Ben Borodach.
“Every time that we get a piece of information, we recalculate the questions that you need to be asked,” he says. “If you have a W-2 job, you’re going to be asked different questions than if you drive for Uber or if you have a small business.”
April, which has a team of about 50, even uses AI internally to help quickly translate the tax code into software, he says, which has helped the company quickly achieve nationwide coverage since its launch in 2021. An AI copilot helps April’s developers write code, and a robust testing and human review program makes sure it’s accurate and ready to pass IRS and state tax agency tests. That let the company become what Borodach says is a rare new entry to the national tax prep market.
“Part of the reason for that is the literal codification of the engine is very expensive and time consuming and hard to maintain,” he says. “So we built an AI copilot that basically 10xes our human engineers.”
April also offers tools to estimate people’s tax burden and optimize their withholdings, which can keep users coming back throughout the year, not just at tax time. Integrations with companies like payroll providers can help easily display accurate and current data.
Intuit is also increasingly taking advantage of integrations between TurboTax and its Credit Karma personal finance software and QuickBooks small business accounting suite, making it easy for users to pull data from the other Intuit tools into their tax returns. If they’ve connected Credit Karma to their bank accounts, they can also potentially pull tax forms directly through that connection, says Arundhati Singh, senior vice president of product management in Intuit’s Consumer Group, which includes Credit Karma and TurboTax.
A feature added in this year’s filing season also lets users upload tax documents like W-2s and 1099s in bulk, with the AI automatically detecting what they are and importing data from them accordingly. The AI can also explain why people’s taxes may have changed from year to year, and even catch missing data or transcription errors when people enter numbers directly.
“Maybe it looks like it’s missing a decimal [or] it seems extremely low or extremely high,” Singh says. “Those types of accuracy checks are now integrated along the product experience.”
Accuracy of AI-provided answers is also important. In March, a reviewer for The Washington Post panned the TurboTax and H&R Block AI tools, saying TurboTax tended to surface irrelevant information and H&R Block sometimes gave wrong or misleading answers. TurboTax subsequently tweaked its system to give more on-point results—confirmed by the reviewer—and H&R Block’s Watts says the company is also continually updating and refining its systems, as well as reviewing the AI’s responses. The IRS also cautioned taxpayers in June not to rely solely on AI-generated tax advice.
Still, it’s likely that some taxpayers will always feel more secure working with a human tax preparer. Watts says H&R Block’s clients have historically been divided between those who prefer to have someone do their taxes and those who like to do them themselves, and while the AI can give new confidence to those doing their own taxes, it may not immediately convert others to filing on their own.
Both H&R Block and TurboTax offer human expert guidance for DIYers, as well as full-service tax prep, and both services say they’re expanding the use of AI to provide aid and tax information to experts as well.
“Historically, it could take up to 20 minutes for an expert to maybe research a very specific tax return question,” Singh says. “With the power of generative AI, they’re able to search that information far more quickly and get really accurate answers.”
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