AI and taxation: What professionals need to know

AI basics for tax professionals: What you need to know

AI is no longer a futuristic concept for the tax and accounting profession — it’s a practical, everyday tool that’s transforming how firms operate.

To better understand the direction AI technology is heading, let’s take a look at some key concepts driving its adoption and how they relate to the day-to-day work of tax and accounting professionals.

• AI (artificial intelligence) refers to the simulation of human intelligence by machines, enabling them to perform tasks such as learning, reasoning, and decision-making. In tax and accounting, AI can streamline workflows, automate data analysis, improve compliance, and enhance decision-making.
• Generative AI (GenAI) creates new content — such as text, code, or images — by learning patterns from existing data. From a tax and accounting perspective, it can draft reports, generate client correspondence, and assist with research by providing natural language summaries of complex regulations.
• Machine learning (ML) is a subset of AI where systems improve their performance on tasks over time through exposure to data, without being explicitly programmed. It is widely used in accounting software to detect anomalies, categorize transactions, and forecast financial trends.
• Agentic AI refers to AI systems that can autonomously make decisions and take actions to achieve goals, often across multiple steps or tools. In accounting, such agents could proactively manage tasks like scheduling audits, monitoring regulatory changes, or preparing client-ready deliverables.
• Large-language models (LLM) are AI models trained on vast amounts of text data to understand and generate human-like language. These models power tax research assistants and chatbots that help tax professionals interpret IRS guidance or navigate complex tax codes.
• Retrieval-augmented generation (RAG) combines generative AI with search capabilities, pulling relevant information from external sources before generating a response. This technique helps ensure that AI-generated answers in accounting contexts are grounded in the most current and authoritative data.
• Bias in AI models occur when models reflect or amplify prejudices found in training data, leading to skewed or inaccurate outcomes. In tax and accounting, this can affect decision-making fairness or lead to incorrect assumptions in client-facing outputs.
• Deep learning is a type of machine learning that uses neural networks with many layers to analyze complex patterns. It underpins powerful AI capabilities like document classification, fraud detection, and automated image or voice recognition in accounting tools.
• Hallucinations refer to instances where the AI model generates false or misleading information that appears plausible. In tax research or compliance contexts, this can pose risks if unchecked, highlighting the need for human review and trustworthy data sources.
• Natural language processing (NLP) enables computers to understand, interpret, and generate human language. In the tax and accounting domain, NLP powers search tools, virtual assistants, and automated document analysis, making it easier to extract insights from unstructured data.
• A prompt is the input or question given to an AI model to initiate a response. In generative AI, crafting clear and precise prompts is essential to obtain relevant and accurate outputs — especially in high-stakes fields like tax advisory or audit.
• An AI agent is a software entity that can perform complex tasks autonomously by interacting with tools, data, and users. In accounting, AI agents can serve as intelligent assistants, helping tax professionals complete tax filings, conduct audits, and respond to client inquiries more efficiently.

How AI is reshaping tax and accounting

The journey of ChatGPT from a general-purpose chatbot to a professional-grade research and productivity tool reflects broader advancements in AI. Early versions struggled with the nuance and complexity of tax and legal language. But today, more advanced models like GPT-4 have demonstrated remarkable proficiency, including scoring in the 90th percentile on the bar exam and accurately performing complex tax scenarios when prompted to act as a tax advisor.

According to the 2025 GenAI in Professional Services Report, 40% of professionals said they already use publicly available tools such as ChatGPT, and the use of industry-specific tools is expected to rise within the next few years. Respondents also believe that generative AI will be a central part of professional services organizations’ workflow within the next five years, if not sooner.

To successfully apply AI, however, tax and accounting professionals must look beyond publicly available tools. An industry-specific AI-driven platform that is purpose-built for tax, audit and accounting professionals will become a key differentiator, empowering tax professionals to deliver personalized insights and elevating tax planning and advisory services.

How tax and accounting professionals are putting AI to work

According to the 2025 GenAI in Professional Services Report, tax research and tax return preparation remained the most common AI use cases cited within the tax, accounting, and audit space. Notably, the proportion citing accounting and bookkeeping fell to 57% in 2025, from 79% in 2024 — when it was the top use case. Tax advisory, meanwhile, rose nine percentage points to become the third-most cited use case in 2025.

As highlighted in our recent piece, The impact of artificial intelligence on the tax and accounting profession, AI is gaining momentum for one simple reason — it helps professionals do more of what matters faster, and with greater accuracy. Whether it’s streamlining compliance tasks, analyzing complex data, or supporting client interactions, AI has become a powerful ally for the modern accountant.

But let’s be clear — AI isn’t here to replace tax professionals. It’s here to work with you, serving as a digital sidekick that handles the repetitive, time-consuming parts of your job so you can focus on strategy, insights, and client relationships. The most successful firms today aren’t just experimenting with AI, they’re integrating it thoughtfully into their workflows to gain a clear competitive advantage.

Practical ways to use AI in your firm

Here’s how you can start harnessing AI right now to improve your daily operations and enhance client service:

1. Automate the basics. Implement AI-powered tax technology to take over routine tasks like data entry, invoice processing, and bank reconciliations. By reducing manual effort in tax prep and documentation, you can shift your focus to more lucrative tax advisory work. 
2. Enhance client advisory services. AI doesn’t just crunch numbers — it interprets them. Use AI-driven insights to flag anomalies, detect trends, and offer proactive recommendations that boost your ability to provide clients with advisory services.
3. Speed up research and documentation. Industry-specific, AI-powered tax research can help you quickly find relevant tax codes, rulings, and authoritative guidance — saving time and improving accuracy in complex research tasks.
4. Create more engaging client communications. Effective communication supported by AI-powered tools helps set expectations, build trust, and streamline processes like document collection, e-signature, and status updates. This streamlining creates stronger client retention and more referrals.
5. Analyze data, fast. Whether it’s thousands of transactions, payroll entries, or unstructured financial documents, AI can sift through large volumes of data using techniques like predictive analytics and anomaly detection. This ability frees up your time to focus on what the data means for your clients.

Building trust in AI: The importance of transparency, accountability, and explainability

As AI becomes more integrated into tax and accounting workflows, building trust in these systems is no longer optional; it’s essential.

Trust is foundational to the professional services industry, and when AI is involved in high-stakes work like tax compliance, audit accuracy, or financial analysis, clients and professionals alike need to understand how and why decisions are being made. Without trust, even the most powerful AI tools risk rejection or underuse. That’s why transparency, accountability, and explainability must be core design principles in AI adoption.

• Transparency means making the inner workings of AI systems visible and understandable to users. In tax and accounting, this includes understanding where the AI pulls its data from, how it processes that information, and what logic drives its recommendations. For example, if an AI suggests a tax treatment for a specific transaction, professionals must be able to trace the sources and reasoning behind that conclusion. This citing includes sources from the Internal Revenue Code, IRS rulings, or trusted content like Checkpoint. Transparency fosters confidence and empowers users to engage critically with AI-generated outputs.
• Accountability ensures that human professionals remain responsible for the decisions made with the support of AI tools. While AI can streamline tasks and uncover insights, it’s not a substitute for professional judgment. Firms should establish clear guidelines for oversight, review, and auditability of AI-driven processes. This oversight is especially important when using agentic AI, so there’s always a mechanism for human intervention when needed, even when conducting audits. By keeping humans in the loop, you can uphold ethical standards and professional obligations while maintaining personal connections with clients.
• Explainability is the ability of an AI system to clearly articulate how it arrived at a particular output. This ability is crucial in regulated industries like tax and accounting, where professionals must justify decisions to clients, regulators, and internal stakeholders. Explainability goes beyond surface-level reasoning as it means AI systems must provide interpretable, plain-language rationale that aligns with domain-specific knowledge. Tools like CoCounsel, which provide citations, context, and source-based reasoning, represent a step forward in making AI both useful and trustworthy.

Ultimately, building trust in AI is about aligning the technology with the values and standards that tax and accounting professionals already uphold. By prioritizing transparency, accountability, and explainability, you can ensure your AI tools not only deliver results but also reinforce the integrity and professionalism your clients expect.

The power of AI: A strategic shift toward value

The tax and accounting industry is entering a new era — one where AI and emerging technologies are transforming how firms operate, serve clients, and grow. While the journey to AI adoption may come with its share of hurdles, the rewards are substantial — increased efficiency, deeper insights, and stronger client relationships. With the right partners and tools, your firm can move beyond compliance work to deliver high-value, strategic services that truly make a difference.

That’s why Thomson Reuters is leading the way with our AI resource center, helping firms navigate and capitalize on this shift. Whether you're just getting started or looking to scale your AI capabilities, we're here to support your success — so you can embrace this change with confidence and unlock new levels of performance and profitability.