Tax returns can be a headache, and it’s tempting to rely on AI tools to make it easier. But here’s the thing, AI isn’t quite the wizard you might think it is. All of the freely available AI tools have their limits and trusting them to do everything can lead to serious mistakes.
So, let’s take a look at five myths about AI for tax returns that you may also be believing and debunk them.
Myth 1: AI Will Automatically Categorise My Info
You might imagine AI neatly sorting every receipt, from your office coffee to your Zoom subscription, into the correct tax category. But you’d be wrong.
AI can only work with the data you provide. For example, Sarah, a part-time tutor in Manchester, may feed AI all her payments but forget to flag a few travel expenses. If that happens, it will misclassify them and she will have to redo the returns before filing.
AI is fast, but it’s not psychic. Check all categories yourself.
Myth 2: AI Will Spot Gaps in My Information
Some people assume AI will notice missing data and alert them. That’s not the case. If you forget to enter freelance payments, rental income or cash from weekend gigs, AI won’t magically detect them.
James, a graphic designer in Bristol, may assume that AI will catch his small Etsy earnings, even if he forgets about them. It won’t. And HMRC won’t be impressed either. AI can help process data, but you still need to feed it accurately.
Myth 3: I Can Be Careless Because AI Will Fix My Mistakes
It’s tempting to think, “I’ll just type roughly, AI will correct errors.” Nope. Mistakes in numbers, misclassified expenses or missing entries stay in your return unless you review them.
Lucy, who rents out a spare room in London, thought the AI would handle a minor miscalculation in her rental income. She ended up having to submit an amended return and pay a small penalty. AI isn’t a magic spellchecker, so keep your eyes on the figures.
Myth 4: AI Can Handle Unusual Situations
Some believe AI will manage any odd scenario, like selling a car, receiving cash gifts or handling cryptocurrency trades. Reality check: AI can only handle situations it’s programmed to recognise. Tom, a part-time delivery driver, presumed his one-off gift from a friend would be automatically classified as non-taxable income. It wasn’t. Anything unusual still requires manual input or professional advice.
Myth 5: AI Can Predict My Future Tax Liabilities
Many think that, with the right prompt, AI can forecast what you’ll owe next year and plan accordingly. The truth? AI can analyse past data, but it can’t predict changes in income, allowances or legislation.
Emma, who works two part-time jobs and invests in a small rental property, wanted AI to forecast her next year’s tax bill. She quickly realised that shifts in allowances and unexpected income made predictions unreliable. Human judgment is still required.
Conclusion
AI can be a useful assistant for calculations and repetitive tasks, but it isn’t a miracle worker. Relying solely on AI for tax returns is a mistake. Think of it as a tool to assist you, not replace careful review. Double-check entries, organise your receipts, and understand your tax situation to avoid mistakes, missed allowances, and stress with HMRC.
