Love it or hate it, artificial intelligence seems to be here to stay. In a profession like tax planning where compliance is of the highest importance, what role, if any, should A.I. play? This is not just a question of preference but also a question of ethics. In some situations, A.I. can be appropriately used to streamline processes and save time, just like any other technology. In other cases, the use of A.I. could put you in violation of Circular 230—the regulations that establish duties, restrictions, and ethical standards for tax professionals.
In today’s blog, we’ll cover the use of A.I. in tax research. Where can these tools help us in the process of establishing legitimate support for our tax positions?
Using A.I. for Tax Research
Using artificial intelligence for tax research does not mean outsourcing the whole process to ChatGPT. However, there are certain steps in the process where A.I. could increase your efficiency and thoroughness. First, we’ll start by defining the steps needed to conduct comprehensive research:
1. Gather all relevant information
2. Frame the research question
3. Identify a starting point
4. Follow the trail and find relevant authority
5. Cite the relevant authority to ensure it is not obsolete
6. Determine what standard the position meets
7. Document and write up the results
How can A.I. fit into this process? Let’s assess this one step at a time, so we can notice where artificial intelligence can assist us and where we ought to rely on our own capabilities.
Step 1: Gather All Relevant Information
This mainly refers to talking to the taxpayer, making sure you understand the facts of their tax situation, and collecting all the documents you need. So A.I. won’t help you much here. The one area where it could come in handy is coming up with a list of questions to ask your clients and a checklist of the information to be looking for.
Step 2: Frame the Research Question
This step also relies on human judgment. Based on the possibilities presented by a client’s tax situation, ask yourself: What do I need to research here? What do I need to figure out to create a viable tax plan for my client? What tax benefits and strategies might apply in this case? Even if you choose to input the general sketch of your client’s circumstances into an A.I. tool, this step will still require your own analytical skills.
Step 3: Identify a Starting Point
Now this is a step where an A.I. tool could potentially shine. Normally, you might go to the Internal Revenue Code or another reliable source to determine where to start your research. Instead, you might start with a tax-oriented A.I. tool, name the question you are trying to answer, and ask it where to start. You can ask the tool to name the parts of the IRC you’ll want to review and ask it to name other sources to investigate. Because you will be doing the actual reading and analysis of these sources, this avoids putting you in the position of overly relying on A.I. Instead, this technology can be used to simply set you off on the right path.
Step 4: Follow the Trail and Find Relevant Authority
Similar to the above, an A.I. tool can help set you off on the right path and even help you quickly pull up possible sources. Of course, you will need to evaluate these sources on your own to determine if they are authoritative, which leads us to our next step…
Step 5: Cite the Relevant Authority to Ensure It Is Not Obsolete
Part of confirming an authority for your tax position is making sure that it’s the most recent decision or guidance on the topic. This is another area where you will need to rely on your own expertise and use A.I. only sparingly, if at all. For instance, if the authority you are relying on is a court case on a certain tax question, you will want to make sure that it is actually the most recent determination. Be thorough in searching for other court cases that might add nuance to the topic. If you consult A.I., you will not want to assume the tool has successfully brought up every relevant authority. After all, A.I. has been known to “hallucinate” and misrepresent court cases, and you certainly don’t want to take a position without reading up on a court case yourself.
Step 6: Determine What Standard the Position Meets
As you read the authority, you then need to determine to what extent it supports the argument you are trying to make. Do you have reasonable basis or substantial authority? Do the authorities speak clearly and directly to your topic? Are there other authorities that seem to present a contradictory perspective? Do not rely on A.I. to tell you that. You will need to apply your judgment and expertise to weigh if the authorities provide strong enough support for the tax position you want to take.
Step 7: Document and Write Up Emails
The final step involves documenting and writing up the results of your research. A.I. is more likely to be valuable here, since you’ve completed all of the actual work. Depending on your comfort level, you might write a first draft and have A.I. clean up the language, or if you have taken thorough notes, you might ask A.I. to take a first pass at a formal memo or communication. In both scenarios, you will want to thoroughly review the final product for accuracy and clarity. If you are actually called upon by the IRS to defend your position, you don’t want any A.I.-generated mistakes to get you into trouble.
Summary
A.I. is not the solution to all of our problems, especially in the tax planning world. However, the savvy user can find the right opportunities to save time, streamline research, and fine-tune written documents. Remember, A.I. is not the tax expert—you are. By treating A.I. more like the assistant it is and relying on your own judgment and analysis to make the final call, you can steer clear of the misuse of these tools. If you choose to bring in the help of technology, make it a practice to double-check any results before taking action on them. Sign up to be a Certified Tax Planner today!
