Outsourced Accounting / Artificial Intelligence Enters the Tax Realm

Artificial Intelligence Enters the Tax Realm

Artificial intelligence offers a range of services to leverage for clients. Automation of mundane tasks and generation of insights and personalized advice are among the benefits. In particular, AI can be used to:

  • Automate repetitive tasks.
  • Analyze and forecast data more accurately when preparing financial statements.
  • Keep up with changing regulations and market conditions.
  • Reduce errors common with manual processing.
  • Facilitate fraud detection earlier than with manual methods; detect anomalies and discrepancies during audit and investigation processes.
  • Make decisions based on accurate forecasts instead of assumptions.
  • Analyze global compliance data to anticipate trends, spot anomalies and reduce effective tax rates.
  • Be more aware of activities that qualify for tax credits.
  • Streamline quarterly and annual tax provision processes.

The promise is that AI will offer financial managers powerful algorithms and predictive analytics to cull insights from customer behavior to create strategies. Generative AI — which goes beyond performing specific tasks based on predefined rules and patterns to create entirely new data that resembles human-created content — promises to be the latest tool to help companies improve forecasts of performance, close books faster and perform data analysis to strengthen decisions. The Wall Street Journal reports that Zoom Video Communications is using generative AI to work up first drafts of tax documentation.

Where will it help?

Generative AI could eliminate many tasks long done by accountants and auditors, generating automated reports, documents and presentations: Fifty-nine percent of executives said their organizations are using emerging AI technology in their finance or tax departments, according to a KPMG survey in June 2023. Twenty-nine percent said they have plans to do so in the next 12 months, while 12% said they’re interested, even if they have no immediate plans.

It’s important to stay on top of developments in the field and invest in training to be able to use AI tools effectively. But don’t ignore the potential risks to data privacy, the accuracy of predictions and the technology’s reliability. That’s why financial pros should stay informed. For example, an AI tool for tax research, analysis and planning that aids in analyzing legislation and litigation to predict tax scenario outcomes is already being used by some firms. Developers claim that AI can analyze thousands of past decisions, expedite research, find supporting directives, weigh alternatives, anticipate court rulings and quantify risk. Still, there remain concerns about AI powering cybercriminals and tax scams.

A look at the future

Tax software offerings powered by AI and machine learning can monitor and adjust to changing business tax requirements, helping clients stay compliant by aggregating data and drawing conclusions from multiple data sources, providing solutions to specific challenges.

What efficiencies can be reaped at a time when many companies hunt for cost-cutting opportunities and face a worsening shortage of accountants? Finance professionals expect more work to be offloaded to AI, making the accounting discipline more strategic and decision-oriented.

The technology’s promise could take years to fulfill. Start small — employ the technology to predict questions, research competition and answer employees’ questions on internal guidelines in accounting policies.

In general, automation has streamlined finances and operations, the processing of payroll data and expense reports, and the review of legal documents. AI and machine learning can predict various financial scenarios and forecast future cash flows.

AI is seen as a supportive tool. For example, firms are using AI for the first draft of financial statements that could reduce the number of days it takes to close books, thus saving money. It’s understandable that finance folks are wary of making sure that sensitive information in AI isn’t accessible to the public.

How BlueStone Services Can Help

It’s important to stay on top of AI, but it can be confusing. Consult with our well-versed financial professionals if you are interested in learning how AI can improve your business. Contact us today to get started.

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