OPINION:
Another stopgap spending bill won’t fix America’s fragile finances. The One Big Beautiful Bill Act, new tariffs and the Department of Government Efficiency’s cost-cutting drive all point to the same truth: Congress must make smarter choices on spending and revenue to rein in the debt. One overlooked risk is that artificial intelligence, if left unchecked in tax preparation, could erode the very revenue needed to stabilize the budget.
Across industries, AI is reshaping how companies operate. In tax preparation, that shift has real implications for the Treasury. What begins as automation for efficiency can quickly turn into a drain on federal revenue, as companies are incentivized to file increasingly aggressive or frivolous claims. If left unregulated, AI could overwhelm the Internal Revenue Service’s already stretched enforcement capacity, and when enforcement fails, the deficit grows.
The danger is clear. Some firms now market AI-powered services as replacements for tax professionals, promising shortcuts to maximize credits. One CEO even boasted that allocating half of a $10 million payroll to “AI-related work” could slash a client’s tax bill by $1 million. Such sweeping claims ignore the strict substantiation rules governing credits and invite abusive filings. Unlike traditional errors that occur on a case-by-case basis, AI allows boilerplate claims to scale across thousands of returns, thereby multiplying the problem exponentially.
This should sound familiar. During my time in Congress, I saw firsthand how quickly new technologies outpaced regulators, including complex financial products that triggered the 2008 crisis and health care systems strained by rapid digital adoption. Tax is the next frontier. The IRS has already flagged concerns about AI-generated filings, warning taxpayers not to rely solely on generative tools for tax advice. Former IRS Commissioner Danny Werfel emphasized this point, noting that AI has a role to play with repeatable tasks with predictable outcomes, but “it cannot replace the need for informed and knowledgeable tax experts.” The agency is right to be worried: Audit rates for complex returns have dropped sharply over the past decade because of resource constraints, leaving fewer guardrails in place just as the risks multiply.
AI’s limitations make this even riskier. Large language models are prone to “hallucinations” — confidently producing false information — a flaw even OpenAI acknowledges as structural and inevitable. Although harmless in casual use, errors in tax filings carry legal and financial consequences. Businesses relying on automated systems without professional oversight risk audits, penalties and reputational damage. Small businesses, often lured by low-cost AI services, are especially vulnerable.
This isn’t a call to stop innovation. Used responsibly, AI can reduce costs and handle routine tasks. The Big Four accounting firms demonstrate that with proper human oversight, AI can complement, not replace, the expertise of skilled professionals. Their approach proves that technology can strengthen rather than undermine compliance. Not all firms play by those rules, and leaving the space unregulated creates a wide-open door for abuse.
This policy area necessitates congressional intervention. Lawmakers should require disclosure of AI use in tax preparation, direct the IRS to issue clear guidance on acceptable practices, and ensure the agency has the resources to enforce existing rules. The IRS, in turn, should expand documentation requirements and target AI-generated filings that lack project-level detail. Congress could use these guardrails as a model for other sectors and agencies as AI’s applications expand.
The principle and the solution are simple. Claims must be accurate and defensible, and Congress needs to establish guardrails for its use in tax preparation and filings. Innovation should strengthen compliance, not undermine it. If Congress continues lurching from one funding crisis to the next while ignoring the revenue leaks from unregulated AI, America’s fragile finances will grow weaker.
• Jake LaTurner represented Kansas’ 2nd Congressional District in the U.S. House of Representatives.
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