You might have caught this commercial during the Super Bowl earlier this year, featuring IBM's Watson super computer. It shows some of the many ways Watson is being used across various disciplines to improve the world, then shows you how it can help you save money on your taxes. As you would imagine I had a few thoughts after seeing this commercial:
Artificial Intelligence (AI) is coming and it will change the world as we know it
I've been reading a lot about the future of AI and the impact it will have on our world. Scientists argue over how fast AI will advance and what form it will eventually take, but they all agree it will have a major impact. Even though our current Treasury Secretary, Steve Mnuchin, doesn't even have artificial intelligence on his radar, the rest of us should be thinking about the future of work and how we will adapt. It's not just the routine jobs you might think of that will be impacted. This site looks at a number of different jobs and their chances of being automated. They put the chances of a tax preparer's job being automated at 98.7%!
H&R Block is a complete hypocrite
H&R Block, along with Intuit and other makers of tax preparation software, have spent millions of dollars lobbying to prevent the government from offering prefilled tax forms that would greatly simplify tax preparation. In many countries around the world this is already how things work. The IRS already collects much of the information you need to report on your returns and as soon as you file a return their software will match up what they have on file with what you report. Sounds redundant doesn't it? Wouldn't it make more sense to use technology to make filing tax returns much easier?
We shouldn't need a super computer to prepare our taxes
Did you know the Internal Revenue Code now clocks in at over 74,600 pages?!? If we really want to help people make sense of their taxes, the government should be focused on simplifying the code. We hear about tax reform every year yet every time they pass a new bill they just makes things more complicated. If you've ever had to dig through volumes of code sections to try to figure out the answer to a complex tax question like I have, trust me you'd be happy to have a supercomputer help you out.
Tax preparation can be automated, tax advice cannot
Preparing tax returns is a valuable service that everyone needs, but our clients don't pay us just to input numbers into a software program. Our clients pay us to understand those numbers, analyze what they mean to them and provide sound financial advice that is in their best interest. A computer might be able to calculate the numbers but true advice requires human judgement. I put together a list of some of the questions I've helped clients with this tax season that I think a computer would struggle with:
- Should I put money into a Roth IRA or a regular IRA?
- Should I convert some of my regular IRA into a Roth and pay tax on that now?
- Does my child still qualify as a dependent?
- Did I establish residency in another state this year?
- Should I make the election to treat capital gains as ordinary income to use up investment interest expense carryovers?
- I was self-employed and on COBRA for part of the year, can I deduct that as self-employed health insurance?
- I received this stock from my grandfather who purchased it 40 years ago, what is the cost basis?
- Should I take money out of my IRA this year or should I use my taxable investments to cover living expenses?
- How should I calculate what I should pay for estimated taxes for next year?
- Should I recharacterize some of the Roth IRA conversion I did last year?
I'm not saying a computer wouldn't be able to answer these questions, because in many of these cases it would. What I am saying is that the computer's answers might not be the RIGHT answers for YOU. Everyone has a different set of facts and circumstances and our value comes from understanding that. A computer can crunch the numbers for you and let you know what it thinks will be the optimal answer to any question, but the optimal answer for one person might be suboptimal for another.
We need to be willing to adapt to the future
Change is inevitable. We can either embrace change or we can fear it. I choose to embrace it and we will continue to adapt the way we work with clients as technology advances. We are always evaluating the latest in tax software and technology so that we are able to take advantage of every innovation for our client's benefit. Eventually computers will be able to do most of the "data input" work on your tax returns for us. I look forward to that day because it will give us more time to spend understanding our clients and providing the kind of advice a computer can't provide.
That is, until the computers become smarter than us. Then it's every person (or robot) for themselves!
The views expressed represent the opinions of L.K. Benson & Company and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or service to any person.
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