AI in tax

The rise of AI in delivering smarter tax solutions

Portrait of Manoj Rathi
Manoj Rathi

Tax Partner, EY India

5 minute read 07 Jul 2025
Related topics
Tax
AI
Tax compliance

Revolutionizing tax compliance: How Artificial Intelligence (AI) is transforming the landscape of tax operations.

In brief

  • AI is automating tax return preparation and filing, significantly reducing human error.
  • The technology enhances monitoring of tax compliance, providing timely alerts on new regulations.
  • AI improves the efficiency of tax audits and fraud detection through data analysis.
  • Businesses can leverage AI for predictive analytics, optimizing tax strategies and client engagement.

Artificial intelligence (AI) is transforming the landscape of tax compliance, offering innovative solutions that streamline processes and enhance accuracy. As businesses navigate the complexities of tax regulations, the integration of AI in tax operations is becoming increasingly essential. Here are some innovative ways in which AI is reshaping tax compliance standards, focusing on its role in automating tasks, improving audits, and enhancing client relationships.  

The current landscape of tax solutions

The tax environment is rapidly evolving due to globalization, regulatory changes, and technological advancements. Traditional tax compliance methods often rely on manual processes that are time-consuming and prone to errors. As businesses expand internationally, the complexity of tax regulations increases, making it essential for organizations to adopt smarter solutions.

AI technology plays a critical role in this transformation. By automating routine tasks, analyzing large datasets, and providing actionable insights, AI significantly enhances the efficiency and accuracy of tax functions. For instance, AI-powered platforms can analyze historical tax data to identify patterns and anomalies, enabling organizations to proactively address compliance challenges. This capability is vital in responding to tax authorities and regulators in an era of increased tax transparency.

Key trends shaping AI in tax solutions

Automating tax return preparation and filing: One of the most significant impacts of AI in tax is its ability to automate the preparation and filing of tax returns. AI-powered software, often combined with robotic process automation (RPA), efficiently extracts data from various sources, such as trial balances and invoices. This automation not only saves time but also reduces the risk of human error. By organizing data into the required tax forms, businesses can ensure compliance with tax regulations while freeing up valuable resources for more strategic tasks.

Monitoring tax compliance and improvement : AI also plays a crucial role in monitoring tax compliance. With the ever-changing landscape of tax regulations, businesses face the challenge of staying updated. AI systems provide timely alerts on new tax laws and compliance requirements, helping organizations mitigate risks associated with noncompliance. By proactively addressing these changes, companies can avoid financial penalties and protect their reputations. This proactive approach is essential in today’s fast-paced business environment.

Enhancing the tax audit process and fraud detection : The efficiency of tax audits has significantly improved due to AI technologies. By analyzing historical data, AI can identify compliance weaknesses and potential areas of concern. Furthermore, tax authorities can leverage AI to detect anomalies and potential fraud within large datasets. This capability ensures the integrity of the tax system and helps maintain public trust. As a result, businesses can feel more secure knowing that their tax compliance efforts are being supported by advanced technology.

Forecasting and predictive analytics : AI in tax also extends to forecasting and predictive analytics. By analyzing sales data, AI algorithms can identify trends across various tax filing cycles—annual, quarterly, and monthly. This insight allows businesses to optimize their tax strategies, reduce costs, and enhance profitability. In a post-pandemic landscape, where economic conditions are constantly shifting, having access to predictive analytics is invaluable for making informed decisions.

Augmenting data management : Tax and accounting professionals often grapple with managing vast amounts of client data. AI-powered document processing technology addresses this challenge by automating data extraction and organization from diverse sources. This automation not only saves time but also improves accuracy in tax, accounting, and audit tasks. By streamlining data management, professionals can focus on delivering high-quality services to their clients.

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Strengthening customer relationships

AI is also enhancing client engagement and satisfaction. Through chatbots and automated client communications, firms can offer personalized services that cater to individual client needs. This proactive approach to client management fosters stronger relationships and improves overall efficiency. By leveraging AI, businesses can ensure that their clients feel valued and understood, which is essential for long-term success.

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Identifying tax advisory opportunities

Another significant advantage of AI in tax is its ability to identify client-specific tax events. By analyzing data, AI can help firms recognize opportunities for timely outreach and the provision of value-added services. This capability allows tax professionals to explain changes in tax regulations and offer tailored recommendations, enhancing client compliance and generating additional revenue. As trusted advisors, firms can leverage AI to provide insights that drive business growth.

Summary

The rise of AI in delivering smarter tax solutions is transforming tax compliance by automating processes, enhancing audits, and improving client relationships. By integrating AI into their tax strategies, organizations can navigate the complexities of compliance with confidence, ensuring a more secure and prosperous future. Embracing these technologies will be crucial for businesses aiming to thrive in a competitive environment.

GenAI was used to develop an iteration of this article. In accordance with EY editorial guidelines, the end product was reviewed and edited by EY professionals before publication.

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    About this article

    Portrait of Manoj Rathi
    Manoj Rathi
    Tax Partner, EY India
    Tax partner; Technology enthusiast; Focuses on integration of AI in tax
    Related topics
    Tax
    AI
    Tax compliance

    EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.