Will AI replace accountants and tax preparers?

The honest version of this answer has two halves, and most writing on the subject gives you only one.

The half that is true

A great deal of tax work is document handling, and document handling is exactly what this technology is good at. A practice that was typing numbers off paper in 2015 is not typing them now.

Anyone whose job was the top five rows has already felt it. Pretending otherwise does the profession no favours.

The half that gets left out

The bottom four rows are not waiting on a better model. They are closed by rule.

The return has to be signed. A paid preparer signs and enters a PTIN, and the IRS defines the signing preparer as the individual who has primary responsibility for the overall accuracy of the return. Every individual who prepares one for compensation needs their own number (PTIN requirements). Preparing a return for money and not signing it has a name, ghost preparer, and a place on the Dirty Dozen list of scams.

Somebody has to be exposed. IRC 6694 penalises a preparer who takes an unreasonable position: the greater of $1,000 or half the fee, rising to $5,000 or three quarters for willful or reckless conduct. The penalty is the design. It puts the person who chose the position at risk for having chosen it. A model cannot be at risk, so a model cannot occupy that role, no matter how well it performs.

Representation is licensed. Circular 230 restricts practice before the IRS to attorneys, certified public accountants, enrolled agents, enrolled actuaries and enrolled retirement plan agents. When a notice arrives and someone has to call the IRS on your behalf, argue the facts and bind you to the outcome, that person holds a licence that can be taken away.

What the work becomes

The shape of the job changes rather than disappearing. Less production, more review. Less lookup, more judgment about which lookup matters. More time on the client conversation where the relevant facts actually surface, because the facts that decide a return are usually the ones nobody thought to write down.

There is also new work created by the technology itself. Clients now arrive holding an answer from a chatbot and wanting to know whether it is right. Explaining why a confident, well-written, wrong answer is wrong takes longer than answering from scratch.

AI is on both sides of the table

The IRS is deploying it too. In September 2023 it announced that artificial intelligence would help select large partnership returns for examination, describing machine learning applied to partnership tax, general income tax and accounting, and international tax. It maintains an internal policy for AI governance covering how the agency uses these systems.

So the trajectory is not humans being replaced by software. It is better tooling on both sides, with the same people still required to sign, argue and answer. If anything, an agency that selects returns by model puts more weight on having somebody credentialed when your return is the one selected.

The question underneath

Most people typing this into a search box are asking one of two things. If it is about a career, the answer is that the routine tier is contracting and the judgment tier is not.

If it is about your own return this year, the question is simpler: when the IRS writes to you about it, whose name is on the document, and can that person pick up the phone on your behalf?