We all know that AI is taking over everything from writing an essay to creating amazing images. But how is it for finance? While there are some amazing advancements, we don’t believe it is quite ready for primetime. Here are 4 reasons AI is not for bookkeeping.
1. Provide Tax Advice
There are many AI chatbots that you can use to answer common tax questions such as: when is Tax Day this year, or how much can I deduct for my retirement contributions this year? However, remember that these chatbots are just fancy options for a common web search. You can get universal tax information but you can not get personalized tax advice for your personal tax or business tax return.
Did you know? More than 75% of consumers have expressed concern about AI spreading misinformation. Source: Forbes
2. Find Tax Credits or Deductions
An AI program can tell you all about a particular credit or deduction. However, it can’t tell you the most important item: whether or not you qualify for it. These deductions and credits include items such as:
- Qualified Business Income Deduction.
- Child Tax Credit.
- American Opportunity Tax Credit.
- Lifetime Learning Credit.
- Interest Deductions for items such as student loans, mortgage, investments lost, and many others.
- State and/or local taxes.
3. Ensuring Tax Compliance
Working with a flesh and blood bookkeeper who have a history of successfully filing tax returns ensures you are compliant with tax laws and regulations for that year. Unfortunately, those who use AI to prepare and file their taxes may be in for a shock when it is done incorrectly. And worse yet, we don’t expect the IRS to be understanding when you blame an AI computer program for the issue.
Did you know? Approximately 43% of business owners who answered a survey were concerned about relying too much on AI. Source: Forbes
4. Establishing Reasonable Cause
We all know ChatGPT can write amazing pieces from fiction to essays to text messages. However, it cannot handle creating something tax related like reasonable cause. The IRS at times will expect a written explanation, which is explained as “determined on a case by case basis considering all the facts and circumstances.” It is often done for those who may owe a tax penalty who have cause to not pay on time. These can include instances for natural disasters, deaths, illness, or loss of records. Only someone with experience should create and send this written response to the IRS on your behalf.
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