Americans are increasingly turning to Artificial Intelligence (AI) tools like ChatGPT and Claude to help prepare their tax returns. But experts warn that the technology can deliver outdated or inaccurate guidance, raising the risk of costly penalties, audits, and even jail time.
According to an Adobe poll, about 26% of Americans are now using AI to file their 2025 tax returns during the current tax season, up from 11% the prior year. Elon Musk promoted the use of his Grok AI chatbot in an X post, saying it “can help with your taxes.”
Using AI to file taxes is dangerous because these tools can produce highly authoritative sounding but incorrect, outdated, or fabricated information due to a phenomenon known as “hallucination.” While AI offers speed, it lacks the professional judgment to interpret complex, nuanced tax laws, and users are ultimately liable for any errors, not the AI provider.
The primary risks of using AI for tax filing include…
1 – High Risk of Accuracy Errors and “Hallucinations”
AI models can invent tax forms, regulations, or court cases that don’t exist.
AI often provides information that seems correct but is slightly inaccurate, which is dangerous in tax, where precision is essential. A recent check showed AI tools provided inaccurate or irrelevant responses roughly 50% of the time on complex tax questions.
AI models may not have access to the most recent tax law updates for the current filing year, leading them to use outdated rules or tax thresholds.
2 – Lack of Contextual Understanding
AI struggles with complex scenarios such as multiple income streams, multi-state filing, cryptocurrencies, or business deductions, often misapplying exceptions.
AI cannot ask follow-up questions to understand your unique situation as a human accountant would, often filling in gaps with incorrect assumptions.
3 – Privacy and Data Security Risks
Typing sensitive info such as Social Security and Bank Account Numbers into a generic chatbot is equivalent to posting it online. These tools often store or use your data to train their models.
Even with security measures, third-party AI platforms can be vulnerable to data leaks.
4 – No Legal Liability for Errors
If AI gives wrong advice, the IRS will treat the error as your fault. There is no safe harbor, special category, or penalty protection for “AI-assisted errors”.
Unlike CPAs, EAs, or other tax professionals, AI tools have no professional liability insurance or ethical obligations.
Let me leave you with this…
I just had to fire one client over a situation like this and I’m getting ready to fire another. In both of the situations, we properly completed a tax return and the client then used AI to analyze it.
Given the fact that almost 50% of the tax advice provided by AI in complex situations is wrong, these taxpayers then demanded that I change the returns. These Mensa Rejects actually threw a fit.
After all, ChatGPT couldn’t possibly be wrong.
If those changes had been made, both of the taxpayers would be guilty of income tax evasion. The changes would have caused clear red flags when the returns were analyzed that would probably have triggered an audit.
Ignorance of the law is no defense.
I’ve been reading tax law for 40 years, and it still confuses me. How could a machine possibly do it any better?
Also, a plain text reading of tax law has nothing to do with how it’s enforced. Although Congress may pass a law, the IRS will then “interpret it” and enforce it as they see fit, sometimes disregarding the law altogether.
Do yourselves a favor. Trust a seasoned tax professional.
Your ability to breathe free air may depend on it.
As always, if you are having problems with your accounting and tax work, please call us today.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
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