State tax agencies are rapidly deploying generative AI to improve efficiency in tax administration, but experts are warning that these efforts must be paired with robust caution to avoid mistakes and legal complications for taxpayers. Key concerns involve the risks of erroneous advice, data privacy, and the need for clear governance and oversight as AI tools increasingly influence public-facing tax decisions.
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Taxpayer Risk: Experts emphasize that if generative AI provides incorrect tax advice, taxpayers could be unfairly penalized without adequate recourse, raising concerns about accountability.
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Need for Oversight: There is a consensus that human oversight, transparent procedures, and clear lines of responsibility are critical to prevent errors and mitigate risks as state tax agencies implement AI solutions.
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Data Security: Integrating generative AI into state tax systems amplifies privacy issues, as sensitive taxpayer data could be exposed or misused if not properly safeguarded.
"We need to ensure that agencies have the right checks in place so taxpayers aren’t left holding the bag if AI gets it wrong," said Caroline Bruckner.