Technological improvements are making it easier for taxpayers and accountants to file taxes on time and accurately, these include everything from tax preparation software to the very latest artificial intelligence (AI). Although tax professionals have been utilising artificial intelligence to some degree for some time, the industry has only just begun to explore the full potential of this technology.
AI: What is it?
Artificial intelligence encompasses machine learning and cognitive computing, to put it briefly. In essence, it is the use of data and/or the internet by the computer to perform intricate activities that ordinarily call for human knowledge. However, AI can quickly and efficiently assess a big amount of data, which is extremely advantageous from a time management perspective.
How does AI apply to taxes?
Artificial intelligence (AI) can be used to evaluate financial data, spot trends, find fraud fast, and increase tax compliance.
Numerous everyday operations, including data entry, classification, and reconciliation, can also be automated with it. Furthermore, by examining new laws and their ramifications, accountants and other tax experts can use these tools to stay current on tax laws and regulations.
AI can provide several benefits to businesses when it comes to handling tax-related tasks.
Here are some ways AI can assist businesses with tax:
- Automation of repetitive tasks:
AI can automate routine and repetitive tasks involved in tax preparation, such as data entry and reconciliation. This not only saves time but also reduces the chances of human errors.
- Data extraction and analysis:
AI can efficiently extract relevant information from large datasets, making it easier for businesses to gather and analyse the necessary financial data required for tax compliance.
- Predictive analytics:
AI can use historical financial data to predict future tax liabilities. This predictive analysis helps businesses plan for tax obligations, ensuring they have the necessary funds set aside to meet their tax responsibilities.
- Risk management:
AI algorithms can assess the tax risks associated with different financial decisions. By identifying potential compliance issues, businesses can make informed decisions to minimise the risk of audits or penalties.
- Real-time compliance monitoring:
AI systems can continuously monitor changes in tax regulations and compliance requirements. This ensures that businesses stay up-to-date with the latest rules and regulations, reducing the risk of non-compliance.
- Natural language processing (NLP) for document analysis:
NLP technologies can be used to analyse and understand complex legal and tax documents. This can help businesses extract relevant information and ensure that their financial activities align with tax regulations.
- Fraud detection:
AI can be employed to detect anomalies and patterns indicative of fraudulent activities. By identifying suspicious transactions or behaviour, businesses can mitigate the risk of tax fraud and comply with regulations more effectively.
How does taxation look in the future?
Smarter tax systems and more effective fraud and tax evasion detection are a few examples of what to expect in the future. To stay future-proof, accountants and companies must stay up to date on the newest developments in AI as the technology develops.
The potential for AI in taxation is virtually limitless as accountants continue to advance, so it’s critical your business’s accounting professional stays abreast of pertinent trends and advancements.
For expert advice on how you can use AI to transform your business’s tax, speak to our expert tax team today