Before You Ask ChatGPT to Calculate Your Taxes, Read This

Let me start by saying this: I use AI daily. 

I use ChatGPT to brainstorm, organize my thoughts, research ideas, and yes, even help me strengthen blogs like this one. Lately, I have been using it to mock-up interior and exterior design ideas for my home.  This has been incredible.

So this isn't an anti-AI conversation.

But there is one thing I really don't want you doing: relying on ChatGPT, Gemini, Claude, or another AI tool to calculate your tax bill or make an important tax decision without having someone knowledgeable verify the answer.

And I'm bringing this up because we're actually seeing it happen.

People are coming to us with tax projections and tax advice they received from AI. Sometimes it's pretty good.

Sometimes it's very, very wrong.

And unless you know taxes, you may not know the difference.

First, Please Be Careful What You Upload

We recently had someone upload their entire draft tax return and the closing statements for every property they had purchased into an AI platform.

My first thought wasn't even about whether the tax calculation was correct.

It was: Do you realize how much personal information you just uploaded?

Think about what's contained in a tax return and closing documents. Social Security numbers, addresses, business information, property information, loan information, and potentially banking information and signatures.

I'm not telling you to never upload a document to AI. I use AI with documents, too.

I'm telling you to stop for a second and ask:

Does AI really need this entire document to answer my question? What information am I sharing? And do I understand how this particular platform handles my data?

Your tax return is basically a roadmap of your financial life. Treat it that way.

The Answer Can Look Right and Still Be Wrong

This is probably my biggest concern.

AI is really good at giving you an answer that sounds right.

It can give you a beautiful calculation with tax brackets, explanations, tables, and a nice confident number at the bottom.

That doesn't mean the number is right.

We've reviewed AI tax calculations where the actual tax treatment was incorrect.

That's where I get concerned.

Because if I look at a tax calculation and something doesn't make sense, I know enough about taxes to stop and say:

"Wait a minute. Why is it doing that?"

If taxes aren't what you do every day, you may not know there's anything to question.

State Taxes? This Is Where Things Can Get Messy Fast.

We've also seen AI get the state numbers wrong.

Your state tax calculation isn't necessarily just your federal taxable income multiplied by a state tax rate.

Every state gets to make its own rules.

Now tell AI that you lived in California for part of the year and moved to Tennessee. Or you own a rental property in another state. Or you received a K-1 from a business operating in several states. Or you received stock compensation while working in multiple states.

It gets complicated quickly.

You could be dealing with resident returns, nonresident returns, part-year returns, income sourcing, credits for taxes paid to another state, and completely different state rules for the same income.

This is an area where I would be very careful about accepting an AI-generated number without having it reviewed.

And Did It Remember AMT?

This is a big one, especially for my clients with stock equity.

We've seen AI projections completely miss the Alternative Minimum Tax, or AMT.

If you have Incentive Stock Options, this can be a huge deal.

You can exercise ISOs, not sell a single share, receive no cash from the transaction, and still potentially create an AMT liability.

So imagine asking AI, "How much am I going to owe this year?"

It runs a regular income tax calculation and gives you a number.

Looks great.

Except it never properly calculated AMT.

That's not a little rounding difference. That can be a very expensive surprise.

What About All Those Things You've Been Carrying Forward?

Here's another question I would ask:

Does your AI calculation know what happened on your prior tax returns?

Because your current tax situation doesn't start from scratch on January 1.

You may have capital losses you've been carrying forward. Suspended passive losses from a rental property. An AMT credit. Charitable contributions you couldn't use in a prior year. Business losses. Tax credits. Basis limitations.

And sometimes something you do this year suddenly makes one of those old items usable.

That's one reason we look at prior-year returns when we're doing serious tax planning.

What happened three, five, or even ten years ago can affect what happens this year.

"I Make $300,000. How Much Will I Owe?" Isn't Enough

I see versions of this question all the time.

But tell me what that $300,000 actually is. 

... Is it W-2 wages? S corporation income? RSUs? Capital gains? Rental income? K-1 income?

Did you contribute to a retirement plan? Did you make estimated payments? Do you have a state PTE tax election? Did you exercise stock options? Do you have suspended losses?

Two people can both make $300,000 and have completely different tax bills.

The number by itself doesn't tell me nearly enough.

Stock Compensation Is an Especially Easy Place to Get This Wrong

If you have RSUs, ESPPs, ISOs, NSOs, or other stock compensation, please be especially careful with AI tax calculations.

Here's a simple example.

You tell AI what your W-2 says.

Then you tell it how much RSU income you had.

But that RSU compensation may already be included in your W-2.

Did the calculation just count it twice?

Then we have cost basis issues when you sell the stock. ISO exercises and AMT. Different holding periods. Different state sourcing rules.

There are a lot of moving pieces.

It's not that AI can't explain these rules. It often can explain them very well.

The question is whether it has all the information it needs to correctly apply those rules to your specific situation.

AI Doesn't Know What It Doesn't Know

This might be the most important point in this entire conversation.

When you sit down with me, I'm not just calculating the numbers you give me.

I'm asking questions.

... Did you sell stock this year?

... Exercise stock options?

... Move?

... Buy or sell a rental property?

... Start a business?

... Sell a business?

... Make estimated payments?

... Make a big charitable contribution?

... Change jobs?

I know to ask those questions because this is my expertise and where I spend all my continuing education and time.

You can't tell AI something you don't realize matters.

And AI may still happily give you an answer without it.

And Yes, Your Tax Professional May Be Using AI Too

Let's talk about this one.

A lot of tax professionals are using AI now. They're using it for research, emails, explanations, and yes, even blogs.

Sometimes you can spot those AI-written blogs a mile away.

The same structure. The same "if this, then that" format. And those long dashes everywhere. Once you see it, you can't unsee it.

But here's the thing.

I use AI to help me write, too.

I used it to help me with this blog.

I'm not embarrassed about that. It's a great tool.

But my blogs start and end with a real person who actually knows taxes, ME.

I'm using AI to help me communicate what I know. I'm not asking AI to be the tax expert.

That's an important distinction.

I know of tax professionals who are trying to produce content so quickly that much of the writing is outsourced overseas and generated with AI around whatever tax topic happens to be trending that week.

There's nothing inherently wrong with outsourcing content or using AI to help create it.

The problem is when nobody with real tax expertise is carefully reviewing it before someone hits "publish."

I've seen tax content published by tax professionals that is simply wrong.

That's concerning because if you're reading an article on a CPA or tax firm's website, you're probably assuming someone at that firm who understands the tax law has reviewed it.

That isn't always the case anymore.

And AI can make that problem worse because it can produce a professional-looking tax article incredibly quickly, even when the underlying information isn't correct.

That's what makes this tricky.

Wrong information doesn't always look wrong.

So yes, AI helps me write. It helps me research. It helps me organize my thoughts and sometimes helps me explain a complicated tax concept more clearly.  It definitely helps me pick out home decor and paint... I have to add this in because I have been fascinated by this feature.

But before something goes out under my name, I'm responsible for what it says. 

That's the difference.

I'm using AI to help me communicate what I know. I'm not asking AI to BE the tax expert.

My Clients Are Using AI Too, and That's Okay

I know my clients are using AI because they tell me.

I've actually had clients fact-check me with ChatGPT while we're on a live consultation.

And you know what? I'm okay with that.

I want you to understand your taxes. I want you to ask questions. And if something I tell you doesn't make sense, absolutely ask me to explain it.

I've also had quite a few new clients tell me they found me through an AI search, which I find fascinating.

So believe me, I'm not anti-AI.

But we've entered this strange new world where sometimes I'm not just giving tax advice. I'm being asked to defend my analysis against an answer ChatGPT generated from a completely different set of facts and assumptions.

I recently had someone come to me with an extensive tax analysis they had created with ChatGPT and essentially ask:

"Can you show me why ChatGPT is wrong?"

Here's the problem with that.

I can look at the final analysis and often spot problems pretty quickly.

Maybe the tax treatment is wrong.

Maybe the state calculation doesn't make sense.

Maybe AMT is missing.

Maybe it's ignoring carryforwards from prior years.

I can tell you at a high level, "This isn't how I would calculate this, and here's what I believe is wrong."

But asking your tax professional to reverse-engineer hours of conversations you had with AI is a completely different project.

I don't necessarily know what you told ChatGPT. I don't know what assumptions it made along the way. I don't know where it pulled inaccurate information, misunderstood you, what information was missing, or at what point the calculation went off track.

And spending several hours figuring out exactly how ChatGPT arrived at the wrong answer probably isn't the best use of your money or my time.

I'd rather start with your actual facts, apply the tax rules correctly, run the appropriate calculations, and show you what your tax situation looks like.

Then we can spend our time on the part that really matters:

What should you do about it?

So What Are You Really Paying Your Tax Professional For?

You're not paying me just to put numbers into tax software. 

You're paying for the years of experience behind those numbers.

My team and I spend many, many hours every year keeping up with changes in tax law, IRS guidance, state rules, court decisions, and new planning opportunities.

Many times, I am sharing with you not just numbers but my actual hands-on personal experience from exercising and selling stock options, buying and selling real estate, starting and closing businesses, moving between states, being a military wife, etc.

But even that isn't the whole value.

Sometimes you come to me and there isn't one perfect answer.

Maybe we can do A, B, or C.

One option saves more taxes today but creates a different issue later.

Another preserves cash.

Another might build more long-term wealth but requires you to put more money away today.

One strategy might technically work, but the additional risk or complexity may not be worth the tax savings for you.

That's the conversation I want to have with you.

What are you actually trying to accomplish?

Then we can model different scenarios, talk about the tax consequences, discuss the risks and tradeoffs, and make a decision that aligns with your individual goals.

That's the part of tax planning that doesn't fit neatly into a prompt.

So Yes, Use AI

I do.

Use it to learn. Ask it questions. Have it explain AMT to you. Ask it what questions you should bring to your CPA. Use it to brainstorm tax strategies you may want to discuss.

Bring those questions to me.

If ChatGPT gives you an answer that's different from mine, ask me about it. I'm happy to explain why I'm recommending what I'm recommending.

But don't confuse "ChatGPT gave me an answer" with "I have an accurate tax projection."

Those are two very different things.

And before you upload your entire tax return, brokerage statements, closing documents, and financial life into an AI platform just to get that answer, stop and think about what you're sharing.

AI can be a fantastic tool in tax planning. I use it myself. But I still want a knowledgeable human asking the questions, checking the answers, weighing the risks, and helping you make decisions that actually make sense for you.

Because ultimately, we're not just trying to calculate your tax bill.

We're trying to help you make better financial decisions that are custom to your goals, your life, and your current position.