AI Fails to Predict… The Future?

By Allan Rolnick, CPA

the judge in the case fined the lawyers $5,000. You already know it’s a bad idea to eat gas station sushi – now you have to worry about ChatGPT lawyers, too!

We’ve touched before on the role that artificial intelligence is likely to play with taxes here. It’s safe to assume that AI will affect how we calculate and pay them going forward in America, even if we don’t yet know how. You could certainly ask ChatGPT, but you probably

47.4%, far less than the student average of 76.7%.) And sophisticated tax planning remains outside of any large language model’s grasp, too.

Here’s why tax preparation and proactive planning are so different. Filing taxes involves compiling specific numbers from various sources like W-2s, 1099s, and K-1s, then adding more numbers from business and personal records, then putting those numbers shouldn’t trust the answer you get.

There are tasks that computers can do faster, cheaper, and more efficiently than people. Preparing tax returns probably strikes you as work that falls into that category. But broader accounting isn’t there, at least not yet. (In April, a group of accounting professors tested ChatGPT on a collection of 27,000 accounting questions. The chatbot scored in the right boxes on the right forms. That’s a fully observable, deterministic, static environment. It’s like chess— there’s an enormous quantity of possibilities and decisions, to be sure, but they’re all made within a predictably closed loop.

Proactive tax planning, on the other hand, means taking on the challenge of an open environment. It’s only partial- ly observable because we don’t know what future tax laws or financial developments will appear. It’s stochastic because it’s random in nature. And it’s dynamic because future actions and circumstances will change the recommended best course of action. For example, deferring tax on 401(k) contributions may be a tax-smart option under today’s rules. But if rates go up tomorrow, deferring that tax may turn out to be an expensive mistake. Today’s news stories sometimes deliver predictable results. You can assume, among other things, that the guy who organized that Russian rebellion will “fall” out a window someday. And they probably ought to pour their own tea from here on out. But don’t assume that AI can replace the value of a good tax planner, any more than it can replace the value of an honest lawyer doing his homework. So call us with your questions before you trust them to ChatGPT! Allan J Rolnick is a CPA who has been in practice for over 30 years in Queens, NY. He welcomes your comments and can be reached at 718-896-8715 or at allanjrcpa@aol.com.