Chatbot Confidential: Using AI for Tax Preparation

Summary

WSJ Tech News Briefing: Chatbot Confidential – Using AI for Tax Preparation

Episode Release Date: March 30, 2025

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1. Introduction to "Chatbot Confidential" Series

In this special series of the Wall Street Journal's Tech News Briefing, host Nicole Nguyen delves into the burgeoning role of AI-powered chatbots in everyday tasks. Kicking off with the episode titled "Chatbot Confidential: Using AI for Tax Preparation," Nguyen sets the stage for an in-depth exploration of how artificial intelligence is reshaping the way individuals approach tax season.

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2. AI Chatbots Enter the Tax Preparation Arena

a. Rising Popularity and Usage Statistics

With the tax deadline looming in 15 days from the episode's release, Nguyen highlights the immense volume of tax filings in the United States—over 161 million individual income tax returns were filed in 2022, according to the Internal Revenue Service (IRS). Amid this annual rush, AI chatbots like OpenAI's ChatGPT, Anthropic's Claude, and Microsoft's Copilot are gaining traction as tools to assist filers.

"Generative AI powered chatbots to get help with everything from writing code to planning vacations," Nguyen explains (00:33).

A recent Harris poll cited in the episode reveals that 17% of tax filers have already utilized AI for tax preparation, with 45% considering it in the future.

b. Testing the AI Contenders

To assess the efficacy of these AI tools, Nguyen and Wall Street Journal’s tax columnist Laura Saunders conducted a comparative analysis of three prominent chatbots:

1. OpenAI's ChatGPT
2. Anthropic's Claude
3. Microsoft's Copilot

They posed the same query to each: “I am employed, work from home, married, have a mortgage, and a child. What kind of deductions do I qualify for? How can I reduce my tax bill?”

c. Evaluating the Responses

ChatGPT emerged as the most detailed, providing comprehensive information but limited to the 2023 tax code. Saunders notes that while ChatGPT covers benefits like the dependent care credit and flexible spending accounts, it fails to mention that these are typically mutually exclusive, potentially misleading users (04:10).

Claude offered less numerical detail but introduced inaccuracies, such as incorrectly suggesting eligibility for the home office deduction for employees working from home—a deduction not applicable under current IRS rules for employees (04:49).

Copilot was found to be the vaguest, lacking specific figures and providing minimal guidance. It only broadly stated eligibility criteria without delving into the nuances essential for accurate tax preparation (05:20).

Laura Saunders concludes, “ChatGPT was the best of the three. It had the most detail” (06:35), yet she cautions that the IRS website remains the most reliable resource.

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3. Insights on AI Performance in Tax Preparation

Saunders emphasizes the complexity of the U.S. tax system as a significant barrier for AI to navigate accurately. She highlights that:

• Complexity of Tax Laws: The intricate nature of tax codes, compounded by individual life circumstances, makes it challenging for AI to provide fully accurate advice.

• Dynamic Legislative Changes: Tax regulations evolve, and AI models may lag in updating these changes, leading to outdated or incorrect information.

• Human Oversight: While AI can offer a foundational understanding, Saunders advocates for consulting official IRS publications or professional tax advisors to ensure accuracy.

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4. Privacy Concerns with AI Chatbots

a. Interview with Privacy Expert Jennifer King

Transitioning from functionality to privacy, Nguyen interviews Jennifer King, Privacy and Data Policy Fellow at the Stanford Institute for Human Centered Artificial Intelligence. King sheds light on the ownership and handling of data input into AI chatbots.

"I would argue that you lose possession of it," King states (08:53). She explains that data submitted to chatbots typically becomes the property of the AI provider and may be used for training purposes.

b. Data Ownership and Privacy Policies

King critically examines privacy policies, noting that companies like OpenAI, Anthropic, and Microsoft have varying approaches:

• OpenAI’s ChatGPT: Offers a "temporary chat" feature, ensuring that conversations aren’t used to train models, thereby enhancing user privacy (10:18).

• Anthropic’s Claude: Markets itself as "privacy first," focusing on safeguarding user data.

• Microsoft’s Copilot: States that it doesn’t use customer data for training without explicit consent and doesn’t share data with third parties without permission (10:57).

King emphasizes the importance of regulatory oversight to ensure these companies adhere to their privacy commitments.

c. Tips to Protect Personal Data

Nguyen and King provide actionable advice for users:

• Use Temporary Chats: Utilize features that prevent chat history from being stored or used for AI training.

• Avoid Sensitive Information: Refrain from entering personally identifiable information (e.g., Social Security numbers) or uploading sensitive documents like tax returns.

• Verify Responses: Always cross-check AI-generated information with official sources or trusted professionals.

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5. Conclusions and Recommendations

The episode wraps up with practical recommendations for taxpayers considering AI assistance:

• Start with AI, Confirm with Official Sources: AI chatbots can offer a starting point but should not be solely relied upon for critical financial decisions.

• Consult Professionals: Engaging with certified tax professionals or established tax software providers like TurboTax and H&R Block can provide more reliable guidance.

• Maintain Data Privacy: Users must be vigilant about the information they share with AI tools to protect their privacy.

Nguyen reinforces the age-old computing adage, “Garbage in, garbage out,” stressing the importance of inputting accurate and non-sensitive information into chatbots to minimize errors (07:28).

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6. Teaser for Future Episodes

Looking ahead, Nguyen hints at upcoming discussions on the use of chatbots in workplace settings, addressing the associated risks and best practices. She invites listeners to engage by submitting questions about AI and privacy for future episodes (12:19).

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Notable Quotes with Timestamps

• Nicole Nguyen (00:33): “Generative AI powered chatbots to get help with everything from writing code to planning vacations.”

• Laura Saunders (02:18): “The main issue is that you'll think that you know something that you don't really know if you use the bot.”

• Laura Saunders (03:42): “Taxes are complicated because life is complicated.”

• Laura Saunders (06:35): “ChatGPT was the best of the three. It had the most detail.”

• Jennifer King (08:53): “I would argue that you lose possession of it.”

• Nicole Nguyen (07:28): “Garbage in, garbage out. Isn't that one of the first rules of computing?”

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Final Thoughts

Chatbot Confidential: Using AI for Tax Preparation provides a nuanced examination of the advantages and pitfalls of integrating AI into tax season. While AI chatbots like ChatGPT offer valuable assistance, users must approach them with caution, ensuring they verify information and safeguard their personal data. As AI continues to evolve, the Wall Street Journal's series promises to keep listeners informed about the intersection of technology, privacy, and everyday life.

Transcript

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[Nicole Nguyen]

People are spilling it all to.

[Wall Street Journal Host]

Generative AI powered chatbots to get help.

[Nicole Nguyen]

With everything from writing code to planning vacations. But some use cases are riskier than others. I'm Nicole Nguyen, personal tech columnist with.

[Wall Street Journal Host]

The Wall Street Journal, and over the next few weeks I'll be hosting a special series of tech news briefing, Chatbot Confidential.

[Nicole Nguyen]

We'll explain what not to tell AI chatbots, whether it's personal, like getting medical advice or professional, such as composing a tricky email on the show. Today it's tax season. The deadline to pay your taxes is in 15 days. Over 161 million people filed individual income taxes in 2022, according to the most recent data from the Internal Revenue Service.

[Wall Street Journal Host]

And recently, some people on social Media are recommending AI chatbots like ChatGPT or.

[Nicole Nguyen]

Claude for tax help like these. Not sure what you could write off on your taxes if you started a business? How about you combine that question with the power of AI and tax season is coming up.

[Oracle Marketing Voice]

But ChatGPT is going to make it so much easier to file your taxes.

[Wall Street Journal Host]

Before we go further, we should note News Corp, owner of the Wall Street Journal and Dow Jones Newswires, has a content licensing partnership with ChatGPT maker OpenAI.

[Nicole Nguyen]

According to a recent Harris poll, 17% of filers said they would use AI for tax prep help, while 45% said they would consider it in the future. Even tax preparation software companies like TurboTax and H&R Block have launched their own AI chatbots. OpenAI and other popular chatbots are free to try, but can you trust their answers?

[Laura Saunders]

The main issue is that you'll think that you know something that you don't really know if you use the bot.

[Nicole Nguyen]

That's Laura Saunders. She writes the Tax Report column at the Wall Street Journal.

[Laura Saunders]

It might tell you about a certain break, but it won't tell you everything about it. Or what's an alternative to that? Or this was true in 2021, but it's not true in 2025, so it lacks context. However it does you Know a pretty good job of telling you some things and orienting you in the landscape.

[Nicole Nguyen]

And the US tax system is so complicated, it's no wonder AI gets it wrong, let alone people. So why is it so hard to file taxes in the U.S. there are.

[Laura Saunders]

A lot of reasons for that. One is that taxes are complicated because life is complicated. For example, there's a very generous tax credit for children. It's $2,000 a year. So what if you have an eight year old who lives with you, she's your niece or your grandchild, and she's with you for four, nine months of the year during school, do you get the credit or would somebody else get the credit? Next, there's human nature. Taxpayers will drive a truck through any tax loophole they can fund. It's even kind of a game for them. So Congress and the IRS have to write the law to mean exactly what's intended, not more and not less. I mean, this takes a lot of words.

[Nicole Nguyen]

Laura and I sat down to test out three free popular chatbots, OpenAI's ChatGPT, Anthropics Clock, and Microsoft's Copilot. We asked each of them the same prompt and had Laura review the responses. The prompt was, I am employed, work from home, married, have a mortgage and a child. What kind of deductions do I qualify for? How can I reduce my tax Bill? Of the three, ChatGPT was the most detailed.

[Laura Saunders]

However, it only goes through 2023, the tax code. So it tells you what the standard deduction was for 2024, but not for 2025. And if you're doing some planning, you really need to know those numbers for 2025. Another thing is that it talks about benefits for children like the dependent care credit or flexible spending accounts, but it doesn't say that usually you can only have one or the other. So you might think, wow, this is great. I'm going to get these two great benefits, but probably you only get one of them. This is how something like ChatGPT could trip you up. You, you certainly have to go beyond it to find out more.

[Nicole Nguyen]

Next was Claude.

[Laura Saunders]

It had much less detail about numbers. And that's sort of good because it doesn't mislead you. But I noticed one thing that was really wrong. The prompt said, I'm an employee and work at home. What about the home office deduction? Well, if you're an employee who works at home, you are not eligible for a home office deduction at all. But Claude implies that you are. And so it gave information that's not accurate.

[Nicole Nguyen]

And finally, Copilot, it was even more.

[Laura Saunders]

Vague than the first two. It doesn't give numbers or almost no numbers. For instance, it doesn't tell you that the child tax credit is a credit of up to $2,000, and it goes all the way up to $400,000 of income. So many, many people can get it. It's not like a credit that ends at a much lower income.

[Nicole Nguyen]

To be clear, CoPilot's response had said the user may qualify for the child tax credit if your income falls within the eligibility range, which most people in.

[Wall Street Journal Host]

The country would when we asked Anthropic about Laura's test, the company said Claude can be helpful to tax preparers by outlining potential deductions and credits. The spokesperson said the bot also recommends professional tax help. For the most accurate guidance, Microsoft said it encourages users to enter multiple prompts as it helps Copilot refine its answers. For more intricate questions like filing taxes, Microsoft recommends the Think Deeper toggle, which uses advanced reasoning for more complex tasks. And OpenAI did not respond in time for publication about ChatGPT's tax prompt results.

[Nicole Nguyen]

So which of the three performed the best?

[Laura Saunders]

I thought ChatGPT was the best of the three. It had the most detail.

[Nicole Nguyen]

Still, Laura says the best place is going to the IRS site itself.

[Laura Saunders]

The IRS has publications on all of these areas. Retirement savings, selling your home mortgage, interest, things like that.

[Nicole Nguyen]

Beyond that, she recommends hiring a tax professional.

[Laura Saunders]

Also, H and R Block gives advice. So does TurboTax. I would check out those if you don't have access to a person that you trust. But when you ask them for advice, find out what's involved, how much it will cost, and exactly what protections they're providing.

[Nicole Nguyen]

Ultimately, if you're going to use these AI chatbots, just make sure to double check the information spat out by these machines because, as we've mentioned, they can get things wrong.

[Laura Saunders]

Just be careful and remember, garbage in, garbage out. Isn't that one of the first rules of computing?

[Nicole Nguyen]

When we come back, we'll hear from a privacy expert on what these chatbots do with your data and how to protect it. That's after the break.

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[Nicole Nguyen]

As more AI chatbots pop up and more people use them, we wanted to know about what happens to your data. And to understand that better, we sat down with someone who's been studying this for many years.

[Jennifer King]

I am Jennifer King. I am the Privacy and Data Policy Fellow at the Stanford Institute for Human Centered Artificial Intelligence, where I research, wait for it, data and privacy and AI to begin.

[Nicole Nguyen]

When people include information and prompts they give to chatbots, who owns that data?

[Jennifer King]

Well, I would argue that you lose possession of it. I looked at the privacy policy of one popular AI chatbot, and it's very clear from their privacy policy that any data that you provide them, ideally through that prompt, answering that prompt, much like a search box, goes to them. And they will potentially use it for training purposes. Now, they may use it for all the normal things that companies have been using data for decades to improve their products and services, personalization. But in that, even in this context, they explicitly state that they may use that data for retraining, which I think is one of the concerns that a lot of us might have, that our data is not just going to be stored data, but is going to be repurposed, essentially.

[Nicole Nguyen]

And King says, just because you give data over to chatbots, that doesn't mean that data will pop up somewhere else.

[Jennifer King]

And of course, if you enter something identifiable, they may actually be working to strip identifiable data from the training set, or when it's being processed and being used by the chatbot. They may try to make sure that full names, for example, aren't bit back out in the context of a discussion, so the guardrails will really matter. But there's certainly been research over the last few years that has found instances where not necessarily chatbots per SE, but LLMs in general have repurposed or spat out memorized data that has mostly just been found online.

[Nicole Nguyen]

So what steps can you take to keep your data private from companies running these chatbots? ChatGPT has a feature called temporary chat that you can turn on. OpenAI says with this feature, ChatGPT won't be aware of previous conversations and that temporary chats won't be used to improve our models. Meanwhile, Anthropic markets Claude as privacy first, and Microsoft says it doesn't use customer data to train Copilot or its AI features unless users provide consent for the company to do so. It also says it doesn't share customer data with a third party unless granted permission by the customer. But how much can you trust what they say?

[Jennifer King]

You can trust them, I think, insofar as if you're making a public statement and a regulator can also view that statement and has the power to actually ask the company questions about that in a context where their answers could be used against them in a regulatory action, you could trust it. I don't necessarily think they're trying to mislead you, and maybe they're not selling or sharing your data with any other third parties. But again, there's that question of are they using it to retrain?

[Nicole Nguyen]

So if you're going to use these chatbots for tax prep, here's the deal. They can give you a starting point for where to look for deductions.

[Wall Street Journal Host]

But a good rule of thumb is to trust but verify. Confirm specific rules and numbers with an.

[Nicole Nguyen]

Official source because the tax code can change. And to protect your privacy, don't upload documents such as tax returns with sensitive information. Keep your prompts vague and omit personally identifiable information such as your Social Security number. Companies have put in some guardrails to try to prevent bad actors from digging up users information. For instance, when you ask ChatGPT for personal data, the bot says, quote, quote, I can't provide that information. But that doesn't mean they're foolproof.

[Wall Street Journal Host]

Next time, we'll tell you about using.

[Nicole Nguyen]

Chatbots in the workplace and what risks come with using them when, say, asking AI to draft up an email to a coworker. Before we go, we want to hear from you. Do you have questions about using AI or regarding privacy? Send us a voice memo, pnbsj.com or leave us a voicemail at 212-416-2236. That's 212-416-2236. I'll be back in a future episode to answer some of your questions. And that's it for Tech News Briefing. Today's show was produced by Julie Chang. I'm your host, Nicole Nguyen. We had additional support from Wilson Rothman and Katherine Melsop. Jessica Fenton mixed this episode. Our development producer is Aisha El Mousslein. Scott Salloway and Chris Inslee are the deputy editors and Falana Patterson is the Wall Street Journal's head of news audio. Thanks for listening.

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[Jennifer King]

Copier.

[Laura Saunders]

I need 15 copies of this printing.

[Office Worker]

By the way. Irregardless. Not a word, Janet.

[Wall Street Journal Host]

Yeah, I know.

[Office Worker]

Page 6 should be regardless of or irrespective of.

[Laura Saunders]

Just print them, please.

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If it were a word, Janet, it would mean without irregard, which is copier.

[Laura Saunders]

Switch to silent mode.

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