This April, the IRS released its annual Dirty Dozen — the twelve tax threats they consider serious enough to warn every American taxpayer about. Most years the list covers the usual suspects: offshore schemes, fake charities, ghost preparers.

This year, AI made the list.

That’s worth stopping on. The Dirty Dozen isn’t clickbait. It’s a formal public warning, and this year the IRS is specifically cautioning taxpayers about AI tools that generate inaccurate tax advice, fabricate IRS rules, and produce returns with errors that trigger audits and penalties.

I’ve seen a lot of tax mistakes in my career. The ones coming from AI are different — not because people are careless, but because AI sounds authoritative even when it’s wrong.

What Happened to Sandra

Sandra came to us last fall with a CP2000 notice — the IRS’s way of saying “the income on your return doesn’t match what we received from third parties.”

She’d used an AI chatbot to help prepare her taxes. It was convenient. It asked the right questions, walked her through everything, and generated a return she filed herself. The problem: she’d sold mutual fund shares, and the AI treated the full sale amount as income — not the gain. It didn’t account for her cost basis.

The result was $14,000 of income the AI invented, a $3,200 bill she didn’t owe, and three months resolving it with the IRS. We got it fixed, but she ended up paying more in resolution fees than she would have paid us to do it right the first time.

We’ve seen the same pattern with rental depreciation, self-employment deductions, and home office calculations. Sandra isn’t an outlier.

Why AI Struggles With Tax Specifically

AI tools can explain general tax concepts reasonably well — they’re trained on enormous amounts of text, including IRS publications. Where they break down is in the specifics. And tax is almost entirely specifics.

The tax code isn’t a set of principles. It’s a set of rules with exceptions, phase-outs, carve-outs, and elections that interact with each other based on your situation — your entity type, your state, your holding period, how an expense is documented, whether an election was timely filed.

AI doesn’t know what it doesn’t know. It fills gaps confidently. And unlike a licensed preparer, it has no liability for what it gets wrong.

What the IRS Is Actually Warning About

The IRS’s concern isn’t that AI is helping people cheat. It’s that taxpayers are relying on advice that is:

• Fabricated — AI tools sometimes cite IRS publications or rules that don’t exist
• Outdated — Tax law changes frequently; AI training data has cutoff dates
• Oversimplified — AI may give the general rule without the exception that applies to you
• Audit-triggering — Returns with AI-generated errors often have inconsistencies that flag for review

The agency has been clear: taxpayers — not the software — are responsible for the accuracy of their returns. That’s always been true. It matters more now.

How to Use AI Without Getting Burned

I’m not anti-AI. I use AI tools in my own practice — for research, drafting client communications, staying current on IRS guidance. Used appropriately, they save real time.

What I’d caution against:

Don’t use AI to prepare or file your actual return. Understanding a concept is different from correctly applying it to your situation. An AI that can explain Section 1031 exchanges doesn’t mean it will correctly apply one to your specific rental property sale.

Don’t rely on AI for anything involving elections or deadlines. Missed elections — the S-Corp election, QBI treatment decisions, depreciation method choices — can cost far more to fix than they would have to handle correctly upfront.

Do use AI to get oriented before you talk to a professional. If you want to understand what a CP2000 notice means before our call, or get a general sense of whether a deduction might apply to you, that’s a reasonable use. Just don’t act on it without verification.

The Bottom Line

When the IRS puts something on the Dirty Dozen, they’re saying they’re seeing it cause real harm to real taxpayers. AI tax advice is on that list this year because it’s landing people in exactly the situation Sandra found herself in.

If you’ve been relying on AI for tax guidance, or you’re not sure your last return was handled correctly, this is a good time to get a second set of eyes on it. That’s what we’re here for.

— Alad Adar, EA
A Plus Tax & Accounting LLC