What Happens if ChatGPT or other AI Does My Taxes?

People rely on ChatGPT and other AI platforms for all sorts of advice including legal and tax advice.  While AI is still in its infancy and it will improve over time, it frequently gives wrong information and hallucinates.  What are the consequences for a taxpayer that receives bad tax advice from ChatGPT or some other AI platform?  This blog post will explore what happens if ChatGPT or other AI does my taxes and some of the potential consequences a taxpayer may face when relying on bad AI. Learn more about ChatGPT and taxes.

One potential consequence a taxpayer may face by relying on AI is tax penalties for bad AI advice.  Taxpayers often have tax penalties abated when they rely on a human tax advisor such as an accountant. There has not been much legal precedent yet directly dealing with tax penalties and AI.  The US Tax Court has rejected taxpayer arguments blaming tax preparation software.  In a recent family law case,  the California Court of Appeals found a pro se litigant violated the California Rules of Court by filing an AI generated brief with the court that contained fake legal citations.  While no directly on point precedents are available at this time, taxpayers who rely on false advice received from AI may certainly face exposure for penalties.

Another possible risk of AI is failing to appropriately interact with agency personnel.  The IRS and other taxing agencies are still largely driven by human agents that follow written procedures as well as apply judgment as to what is “reasonable” under those written procedures.  AI may not only give advice as to what guidelines the agency must follow, but also what would be a reasonable ask for an agent for that particular agency. 

For example, it is fairly common for tax professionals and tax auditors to face deadlines to negotiate amongst each other as to the scope and timing of ongoing audits.  AI may not necessarily know what types of deadline extensions a taxpayer can reasonably request or the reasonable scope or limits of an audit.  There is an etiquette one must follow when dealing with taxing authorities and AI is not necessarily versed on that etiquette. 

I understand if readers are skeptical of my opinions concerning AI.  As a human being with natural intelligence, readers may claim I am biased against AI as it represents my competition.  I have had clients show me advice received from AI that was absolutely terrible.  If anything, AI will create a lot of business for people tax attorneys because people will need real tax professionals to undue the mess their reliance on AI advice created.  Nevertheless, I understand the skepticism some may have, and you are more than welcome to take my opinions with a grain of salt.  However, a large grain of salt should also be applied to AI generated tax advice.   

RJS LAW has a team of tax attorneys with decades of combined experience and natural intelligence.  We help clients with tax related issues before tax agencies including the IRS, FTB, CDTFA, and EDD.  Along with our in-depth knowledge and experience in Trust and Estate law, RJS LAW provides a wide range of tax services including audit defense, collections defense, tax planning, and criminal matters. Please reach out for a no-cost consultation regarding your tax related issues.

Written by Joseph Cole, Esq., LL.M.