As April 15 nears, tax professionals and CFOs are taking a closer look at how technologies like artificial intelligence can help them navigate a complex tax environment.

However, companies face a quandary when it comes to adopting the technology — being both too early and too late to integrate it could be equally detrimental for businesses, said Josh Schauer, senior vice president of finance at insightsoftware. The Raleigh, North Carolina-based company offers financial software to help manage FP&A, accounting and other financial processes.

“I think the nature of what the AI is solving for would be very important,” Schauer said in an interview of potentially integrating AI, which has yet to become widely adopted in the space. “If they're solving for tax strategies and ways to help you avoid cash payments and things like that, that would be one thing…if it’s AI that sort of just helps establish the same numbers that you're going to get to, but in a quicker time period, that would be a bit of a trade off.”

All roads lead to data

Tax professionals today are mulling AI as they look to manage a kind of “perpetual audit,” where they need to accurately gather a rising amount of data, Schauer said.

“I think the punchline is that really, tax preparation is a 12-month cycle,” he said. “It's not like, ‘Oh, hey, it's January, we need to rush, we need to get our tax documents in order.’ It is really an ongoing cycle.”

Moreover, tax authorities today are “getting much smarter” and are tapping the same systems and tools that preparers are, “and so in many cases, the criteria for which they're requiring us to provide backup and support is increasing,” Schauer said.

“So you’ve got a standard of having to provide more audit support documentation, and you're on timelines that are getting tighter and tighter,” he said. “And so what it gets back into is a very familiar concept with all things that come out of the office of the CFO, which is that you're dependent upon data, and you're dependent upon good quality data going into any system.”

To keep pace, companies are utilizing solutions that can aid with the necessary calculations in areas like transfer pricing or with audit support. For larger businesses especially, having some type of software or automation in place is no longer a nice-to-have but a must-have as they juggle the data requirements for incoming regulations such as the Pillar 2 directive — a large area of focus for finance chiefs, Schauer told CFO Dive in a previous interview.

“It’s an area where I think there's an addressable market that's growing, because it's cheaper to pay for a software than it is to pay double your taxes,” he said, something that is certainly a concern for CFOs and tax professionals in the face of new guidelines such as Pillar 2.

However, while the need for these types of automated solutions is growing, many financial professionals remain cautious about bringing AI into complex, highly-regulated spaces such as tax despite the potential benefits the technology could provide. AI can help with needed research on tax or accounting standards, for example, as well as help to streamline data management for accounts that are “drowning in oceans of client data,” according to a recent write-up by Wolters Kluwer.

Implementing AI could also have its drawbacks, however; new chatbots introduced by tax platforms such as TurboTax and H&R Block were riddled with “hallucinations” and inefficiencies about half of the time, according to a Washington Post report.

“I think the general sentiment across the CFO circuit is that there's still remains optimism, but also maybe hesitancy,” Schauer said of how finance professionals are viewing the technology.

Companies may also lack the necessary resources to tap AI. In a 2024 Thomson Reuters report, more than half of corporate tax departments noted their companies’ technology maturity was “chaotic” or “reactive,” while 87% said their business’ tech competency was either “somewhat competent” or “not competent.”  

It’s early days for that technology to have filtered into tax particularly, Schauer said. Only 9% of corporate tax professionals said their departments have integrated AI into their daily work, while 4% claimed they were active AI users, Reuters found.

“I do think just as a general statement, it still remains a bit of a wait and see, unless you're one of the large companies that has endless dollars to go build teams to explore that,” he said.

The talent question

CFOs’ worries surrounding tax have only been exacerbated by a widening shortage of incoming talent in the accounting and audit spaces. The expectations for and scrutiny on the various roles under the office of the CFO have steadily increased, leading less people to consider accounting or tax as a career and leading to less talent on the back end, Schauer said.

Tax can also be a somewhat thankless role, he said, with the expectation that it be done in the background and only garnering attention when errors emerge. “So it's a bit thankless and so I think it is relevant certainly that there's probably a lower level of supply here than there is demand,” Schauer said.

The talent shortage combined with the growing need to automate tax processes in the face of growing data volumes could change the way accounting departments are set up in the future.

When it comes to addressing gaps in one’s tax compliance needs, “the software helps a lot, because as opposed to maybe being a team of four or five, you might need a team of one or two really talented individuals,” Schauer said. “So that's a really big component of it because it is much easier to hire one or two really strong employees than three to five.”