From Hype to Reality: Demystifying AI for Tax Professionals

We’ve been told that AI is poised to reshape industries, including your tax practice. Accounting firms have announced billion-dollar investments in generative AI over the next few years, even the IRS is looking to implement AI into its data analytics. Generative AI is supposed to transform the way we approach problems, automate processes, analyze data, and conduct tax research. But is the hype real? Despite hearing about it everywhere, AI remains shrouded in complexity and mystique. This blog aims to demystify AI, making it accessible and actionable for tax professionals.

At its core, AI encompasses a range of technologies that enable machines to mimic human intelligence. This includes predictive analytics, where AI algorithms analyze historical data to forecast future trends and outcomes, natural language processing (NLP), which allows machines to understand and interpret human language, and the automation of routine, repetitive tasks that consume valuable time. Each of these applications has profound implications for the tax profession, offering opportunities for efficiency, accuracy, and insight.

The promise of AI in tax services is fundamentally about enhancing the quality of research and guidance you can provide for your clients. By leveraging AI, you can navigate the tax codes with greater precision, uncover insights from vast amounts of data that would be impractical to analyze manually, and stay ahead of regulatory changes with predictive analytics.

Enhancing Quality Assurance in Tax Research

Unlike the traditional approach to tax research, which involves wading through complicated search queries or relying on poor-quality internet searches, AI offers a direct path to quality information backed by credible sources.

Through algorithms designed to analyze data across diverse sources — from regulatory updates to court rulings — you’ll have access to information that is pertinent and reliable. This advanced capability to filter through noise for authoritative, primary sources is invaluable to providing good, actionable advice to your clients.

Let’s look at an example. A generative AI solution like Ask Blue J:

  • Is built by tax experts and legal professionals
  • Has a curated database built on a foundation of licensed data from Tax Analysts
  • Includes primary sources, including the Internal Revenue Code and Regulations, Revenue Rulings, Rev Procs, PLRs, technical advice memorandums, notices, CCAs, US Supreme Court tax cases, and more
  • Provides secondary sources, including Tax Notes articles and commentary

Natural language processing, a feature of many AI systems, allows solutions like Ask Blue J to comprehend the context of queries and enhance the relevance of search results. This means you can quickly find specific answers without the detour through irrelevant information.

This new found efficiency and depth of research will provide significant advantages in tax planning and compliance. You’ll be able to help your clients uncover tax savings and interpret the implications of new tax law changes, which are both crucial for their success.

Use Case: Using AI to Educate Junior Staff

Integrating AI into your workflow offers an opportunity to accelerate the education of junior staff. At Larson Gross, using traditional methods of research wasn’t really working for inexperienced staff. Tanya Silves, Partner and Tax Director at Larson Gross explains “We use Checkpoint for our research…where we were struggling was with a lot of our newer staff engaging with it well and frequently.” This infrequency in use led to more training sessions, adding to the confusion.

Even when they were able to gather information successfully, there was still doubt as to whether or not the information was pertinent and true. The alternative for them was to resort to Google, which is notorious for inaccurate information. After partnering with Blue J, this challenge is resolved. It’s been adopted across all levels of the firm because it “actually helps people”, research is easy to access and its accuracy is verifiable because each answer the AI provides comes with references.

Using tax AI will help significantly flatten the learning curve for junior staff, speeding up their ability to contribute effectively. 

Staying Ahead of Regulatory Changes with AI

Tax regulations change frequently, making it tough for tax professionals to keep up. It's crucial you have current information to ensure the advice you provide is accurate. Falling behind on these updates can lead to mistakes, non-compliance, and potentially severe consequences for businesses and clients.

While the inner workings of AI are complicated, they’re a simple, practical solution to this challenge. For example, Ask Blue J has partnered with Tax Notes, a leading multimedia source of breaking news, in-depth analysis, and insightful commentary on tax administration and policy. Through this partnership, the team at Ask Blue J curates Tax Notes’ news and commentary every day, bringing the latest in-depth interpretations into the algorithm alongside the primary source materials, further strengthening the answers it generates. This means as soon as a new law is passed or an existing one is amended, you can know about it. Immediate access to this information prevents the oversight of new regulations and aligns your tax practice with the latest requirements.

Some AI systems can even offer predictive insights. They analyze trends in regulatory changes and can forecast possible future adjustments, helping you position your clients to adapt to potential changes. 

Imagine a tax firm that relies solely on difficult to navigate databases or Google searches to keep up with tax regulations. A new tax regulation can easily slip through the cracks, leading to incorrect filings for several clients. The firm now faces penalties, and its reputation takes a hit. Clients are unhappy, and the firm is scrambling to fix the errors, costing time and money.

In this scenario, AI would’ve made a difference. The firm would have received an alert as soon as the regulation changed. The tool could also have highlighted the specific clients and transactions affected by the new rule, allowing them to take proactive steps to ensure compliance. This could have saved them from financial penalties and protected its reputation.

To see how accounting firms are implementing generative AI into their workflow, watch our Customer Spotlight with Larson Gross. It’ll provide insights into how you can leverage solutions like Ask Blue J for more effective tax research.

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