Artificial intelligence is quickly transforming the global economy, promising increased efficiency and productivity at the same time as it threatens millions of jobs. Of course, someday AI might decide it’s smarter than the species that created it (not a high bar) and use it to wipe out human life. (But who cares if we’re all making money now, amirite?)
Plenty of lawyers are already working with AI’s most famous tool, ChatGPT. This is a “multimodal large language model” that looks like what might happen if Google’s autofill feature got bitten by a radioactive spider. Some of those early adopters have discovered it can be an unreliable partner. Just ask Michael Cohen, Donald Trump’s former “fixer,” who used Google’s version of the same technology to cite fake cases to a judge late last year. (We’re still waiting on his ruling, but he probably won’t be impressed.) Yet that hasn’t stopped startups like Callidus, Spellbook, and Casetext from rolling out AI-based legal assistants to help lawyers practice more effectively. (Insert obligatory joke about why they call it “practicing.”)
Naturally, tax professionals hoping to rescue wasted dollars for their clients for are hoping to harness AI’s power, too. A startup company called Blue J has introduced two services for tax pros eager to hop on the AI bandwagon. Their diagramming tool helps planners create helpful illustrations for transactions like mergers and acquisitions, corporate spinoffs, and the like. And they’re more exciting “Ask Blue J” chatbot promises “research with confidence” to help planners research caselaw, clarify understanding, and expedite drafting.
Ask Blue J is already attracting attention for predicting Tax Court results, especially with one thorny employment tax question: whether a worker is an employee or an independent contractor. It may not be as entertaining as calling Super Bowl winners, or how much airtime Taylor Swift gets during the big game. But who wouldn’t want to know how the Court will rule? Revenue Ruling 87-41 lays out a 20-factor test for the IRS to use to make that call. (Lawyers love 20-factor tests – billing endless hours to parse all those contingencies is why they can afford BMWs.) So, Ask Blue J has a “worker classification” module specifically dedicated to answering that question, using a database of cases dating back to 1927. They report their tool is 97% effective, which can eliminate a lot of expensive uncertainty and guesswork.
What happens when someone decides to harness this superpower for evil, though? One math-minded Instagram user posted an intriguing assertion: “The IRS audits just .2% of tax returns. That gives you a 99.8% chance of successful tax fraud. The expected value is too good to ignore.”
Of course, the IRS is boarding the AI train too, starting by using it to police large partnerships managing hedge funds, private equity, real estate, and law firms. But someone had to be the first to use a horseless carriage to flee a bank robbery. Someone had to be the first “cocaine cowboy” to fly drugs for some south-of-the-border cartel. Someone had to be the first hacker to use a computer to steal millions online. And so, inevitably, someone will be the first miscreant to use AI specifically to cheat the IRS or cover their tracks. Odds are good that it’s already happened, and we just don’t know about it.
The postmodern philosopher Yogi Berra once said, “It’s difficult to make predictions, especially about the future.” But we can tell you, with >97% certainty, that you’ll pay less tax with planning than you will without. So let us put AI to work to help save you big time!