Artificial intelligence (AI) technology is making a big impact on businesses in𒁃 many respects, including the preparatꦚion and filing of business taxes.

The Internal Revenue Service (IRS) is evaluating AI’s potential applications for tax a🎶dministration while considering how to minimize any🐠 associated risks.

The technology promises businesses easier tax prep and filing, while streamlined tax administration could mean shorter customer wait tiꦺmes and more efficient services.

However, AI in business tax applications has its limitations and concerns some professionals. Human expertise and oversight are still necessary.

How AI Can Help Tax Preparation and Filing

AI-powered call bots and online chatbots, such as those used by the IRS and H&R Block, offer to assist business taxpayers with answers to♈ frequently asked questions andܫ other routine tax prep queries.

With the goal of facilitating and enhancing 24/7 customer service, they're used to shorten taxpayer wait times and free human agents to focus on more complex cases.

Automation enabled by 澳洲幸运5官方开奖结果体彩网:artificial intelligence is also speeding up the delivery of taxpayer refunds by the IRS. Since 2022, the agency has used AI to digitize paper tax returns and accelerate their processing.

AI-Based Tax Preparation Software

Many tax software products incorporate AI to 澳洲幸运5官方开奖结果体彩网:streamlജine the tax preparation process for business taxpayers.

However, due to the often complex nature of business taxes, most tax sof🤡tware uses AI only as a virtual assistant or for specific applications. It does not use it to make tax calculations.

Furthermore, some of those involved in business tax prep and filing have concluded that AI can't interpret data effectively or make useful recommendations yet.

There's no doubt that ongoing, powerful advances in AI will drive greater and better use of it in tax prep software.

Examples

Intuit Assist, an AI assistant in certain TurboTax and Quickbooks software packages, uses traditional and generative AI that answers tax questions, analyzes data to find deductions and credits, and checks for mistakes in tax returns.

H&R Block, offers AI Tax Assist, which provides AI-generative chat at any stage of the tax preparation process.

Reconcile is software with AI-powered tools for entrepreneurs and individuals who manage multiple income streams. It offers tax assistance and broader financial assistance. Its chatbot answers questions and provides custom recommendations.

FlyFin is an AI- and CPA-powered tax filing product aimed at self-employed individuals and business owners. The AI tool categorizes expenses, uncovers tax deductions, and answers questions.

One AI business tax assistant with more to offer is TaxGPT. It handles time consuming tax research to update you on regulatory changes and ensure tax compliance, analyzes your business tax documents, and secures them for document management.

TaxGPT creates customized content for internal emails or IRS communications and produces tax documents and reports for your business. It helps you to respond to inquiries from clients, vendors, and other business contacts quickly and efficiently.

Tax Compliance

AI-driven analysis and automated transaction categorization can help businesses with tax compliance and to file their taxes on tim✱e.

TaxJar is software that aims to help small to midsized ecommerce businesses manage their sales tax compliance across jurisdictions. It automatically calculates sales tax rates, classifies products, and does multistate filing.

It can also integrate with different 澳洲幸运5官方开奖结果体彩网:ecommerce and 澳洲幸运5官方开奖结果体彩网:enterprise resource planning (ERP) platforms.

AI that's able to process and analyze vast amounts of data will also be able to keep track of changing regulations and tax requirements to ensure that businesses are in compliance.

Benefits and Limitations of AI for Business Ta🌼xes

Benefits

AI can impro🃏ꦉve the tax preparation and filing process for businesses in several ways:

• Streamlining data: AI-powered business tax software tools can import and analyze financial or sales data from other sources, including 澳洲🧸幸运5官方开奖结果体彩网𓄧:customer relationship management (CRM), ERP, and 澳洲幸运5官方开奖结果体彩网:ecommerce platforms.
• Increasing accuracy: AI can keep up to date on changing regulations and is a useful tool for confirming regulatory compliance in relevant jurisdictions and filing years for things like sales tax and specific tax provisions.
• Driving efficiency: Data entry and organization tasks such as categorizing expenses and sales can be automated with AI to save businesses time.

Limitations

However, AI☂ technology also presents potential issues and raises concern:

• Potential to present false information: AI has generated errors and nonsensical information (referred to as AI hallucination), which can have serious implications for business tax filing.
• Limited ability to analyze and interpret: Generative AI models are limited in their ability to analyze tax regulations and interpret context or relationships between tax code sections that might override one another. As such, they are not a substitute for consulting a trained tax expert, particularly for a complex tax situation.
  

The Future of AI for Business Taxes

As AI technဣology continues to advance, some trends are emerging for AI-powered business tax applications.

For one,𝓀 more and more tax agencies are using AI virtual assistants to cut down on customer queries so that their human agents can focus their attention on addressing more complex cases.

However, 🍸there is a lot of room for improvement, as many AI tools generate incorrect or irrelevant answers to straightforward tax queries.

Second, there are also more AI startups looking to harness AI for business tax preparation. One example is april, a company offering embeddable tax filing software to the fintech, financial services, and employee benefits industries.

Third, the potential ♛impact that AI could have on reducing the effort and expense for businesses of tax preparation and filing could be huge.

The Taxpayer Advocate Service (TAS) estimated that the average small business spent roughly 82 hours and $2,900 on tax compliance in the 2022 financial year, while business entities in the U.S. spent a cumulative 1.14 billion hours and $48.3 billion on tax preparation.

In 2024, the IRS estimated that it took a business 105 hours on average to complete Form 1120, the tax return for corporations. Small corporations spent 55 hours working on it while large corporations took 830 hours (more than 20 weeks) to get it done.

And as for what businesses had to spend, according to the Tax Foundation, "The compliance cost of business (corporate) income tax returns is nearly $119 billion. Their quarterly tax filings cost $44.7 billion to comply with while depreciation schedules cost another $25 billion."

As such, ongoing AI impro🐬vements in accuracy and efficiency♔ could have a major material impact on the day-to-day operations and budgets of businesses.

The Bottom Line

As more AI startups enter the tax software space and AI technology continues to develo🍒p, taxpayers and tax agencie💦s alike may be able to take advantage of the increased efficiency, data analysis capabilities, automated workflows, and more that AI has to offer.

Even the IRS is looking to AI to identi𝕴fy “compliance threats” and reduc🐓e the number of unnecessary audits it conducts.

While AI has been implemented in several tax software products and offers promising future applications for business taxes, the complex nature of tax preparation and filing warrants continued human oversight and interpretation.