Here’s what to know before using AI chatbots to file your taxes

The tax deadline is approaching and some filers are turning to AI-powered chatbots for help with their returns.

But taxpayers should be wary of generative AI – which uses artificial intelligence to create content – ​​for tax advice, experts say.

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

Another recent survey had similar results, with 17% saying they had used AI for tax filing and 45% being open to its future use, according to a Harris poll.

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

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

This season, taxpayers have several options for AI-based advice, including software like ChatGPT, as well as chatbots from TurboTax, H&R Block and the IRS.

In 2022, the IRS deployed voice chatbots to help answer basic questions about payment and collections notices. The agency has since expanded its use of AI-based technology.

Since rolling out in January 2022, the IRS has used chatbots to help more than 13 million taxpayers and helped set up approximately $151 million in payment arrangements, the agency announced in September .

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

However, “AI does not complete or file tax returns in TurboTax,” she said. “If a TurboTax filer has a question about their tax return, they are just one click away from a live tax expert at any time. »

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

“We also have a team of human testers who review questions and comments daily to identify what needs to be added and improved,” a company spokesperson said.

Still, AI chatbots “are not ready for prime time” when filing taxes, according to Subodha Kumar, professor of statistics, operations and data science at Fox School of Business in Temple University.

Kumar has tested AI chatbots with his students and found that 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.

Additionally, the data is not fully updated, with different knowledge cut-off dates, depending on the version of ChatGPT you are using. The latest AI model is GPT-4 Turbo and provides contextual responses through April 2023. This could pose a problem with annual inflation adjustments, tax changes from Congress and the IRS.

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

Even though experts agree that AI chatbots are not ready to provide personalized tax recommendations, there is still a chance for education.

“I think there are opportunities to use tools like that in a broader context,” said Michael Prinzo, managing director of tax at CliftonLarsonAllen. “This could be an effective tool provided that personal information is protected.”

Experts warn that there could be data security issues when connecting financial information to ChatGPT or other AI chatbots.

“There could be several types of (data) leaks,” said Spencer Lourens, managing director of data science, machine learning and artificial intelligence at CliftonLarsonAllen.

However, you can enter a general outline 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-based chatbots by double-checking the details on the IRS website or with a tax professional, added Walker of the American Institute of CPAs.