AI is changing how Americans file taxes in 2025 — 3 risks you should know before filing

Many people in the United States are getting ready to file their 2025 taxes. Now, Artificial Intelligence (AI) is playing a big role in this process. Many tax software programs use AI to help people prepare and file their tax returns. Earlier, AI mostly worked quietly inside the software. People did not really see it. But now, AI is becoming a tax helper that people can talk to while filing their taxes. These AI helpers can sort tax papers, group deductions, find missing forms, and suggest tax credits that people may have forgotten to claim.

Experts say that millions of taxpayers may now chat with AI tools while doing their taxes. This can make tax filing faster and easier for many people. But experts also warn that people should not trust AI completely. These tools can also bring some new risks. According to Yahoo Finance, the biggest risks this tax season include, more checking from the IRS, mistakes by AI in complicated tax situations, and new scams that use AI to trick taxpayers.

1. IRS AI audits may increase

The Internal Revenue Service (IRS) is also using AI to detect possible problems in tax returns. One important system used by the IRS is called the Discriminant Information Function (DIF), which helps decide which tax returns should be audited. Recent updates to this system allow the IRS to spot income mismatches much faster using AI and automated tools. AI systems can now compare the income you report on your tax return with different financial documents and digital records.


The IRS checks data from W-2 forms, which report income from employers. The agency also reviews Form 1099-DA, which shows income from cryptocurrency transactions. Another form monitored is Form 1099-K, which reports income received through payment apps like Venmo or PayPal. Instead of manual checking, AI tools can now automatically cross-match this information with other digital records. The IRS may also look at bank data, public records, and sometimes even social media activity to see if someone’s lifestyle matches the income they reported, as stated by Yahoo Finance. These systems are mainly designed to catch high earners or big companies hiding income, but regular taxpayers may also receive more IRS notices than before.

2. AI can make mistakes with complex taxes

Another big risk is that AI tools can misunderstand complicated tax situations. Experts say AI answers can sometimes sound very confident even when they are wrong. Croak warned that people with tax situations beyond a simple W-2 job should double-check AI advice. Complex cases include income earned in multiple states, which AI systems may misinterpret. AI may also struggle with Roth conversion transactions, which involve moving retirement savings into a Roth account.

Another tricky area is crypto staking rewards, which can create confusing tax rules. Accuracy is especially important in the 2025 tax season, because new rules from the One Big Beautiful Bill (OBBB) law have been introduced, as noted by Yahoo Finance. One major provision of this law is no tax on tips, which affects workers who earn income through gratuities. Another provision is no tax on overtime pay, which changes how some earnings are taxed. If AI misunderstands these new rules, taxpayers could claim wrong deductions or credits. That could lead to penalties, corrections, or even IRS audits later.

3. AI-powered tax scams are increasing

Cybercriminals are also using generative AI to create more convincing tax scams. Traditional scams like phishing emails and fake text messages are now becoming harder to detect because AI helps scammers write more realistic messages. Some scammers are even using voice cloning technology to imitate accountants or IRS officials.

AI-generated videos can also be used to pretend to be tax experts or government representatives. Criminals sometimes build fake websites that look like real IRS pages or tax software platforms. These scams may claim that the taxpayer has unpaid taxes and must send money immediately to avoid legal trouble. Other scams trick people into visiting a fake website and entering personal information, which can lead to identity theft.

How taxpayers can protect themselves

Experts recommend carefully documenting all additional income, especially payments received through apps. For example, a gift or reimbursement on a 1099-K form might be wrongly treated as income, which could trigger an IRS discrepancy. Taxpayers should save records from payment apps like Venmo or PayPal to prove the correct type of transaction.

People with complicated finances should consult a certified public accountant (CPA) or tax professional instead of relying only on AI. The IRS also offers tools like the Interactive Tax Assistant, which provides official guidance for tax questions.

Taxpayers should never respond to calls, texts, or emails asking for money or personal information, even if the message claims to be from the IRS. If there are concerns, the safest step is to visit the official IRS website directly to verify information. Experts also suggest setting up an Identity Protection PIN, which helps protect taxpayers from identity fraud.

The IRS is also gradually stopping paper refund checks to reduce fraud risks, as stated by Yahoo Finance. Because of this change, taxpayers should add correct direct-deposit bank details to receive refunds faster. Without updated bank information, refund payments could be delayed by at least six weeks. Overall, experts say AI can be useful for organizing documents and answering simple tax questions, but it should not be trusted blindly for the entire tax filing process.

FAQs

Q1. Can AI help people file taxes in 2025?

Yes, AI tools can help organize documents, find deductions, and suggest tax credits, but experts say people should double-check the results before filing.

Q2. What risks come with using AI for taxes?

AI may make mistakes with complex tax situations, and scammers may also use AI to create fake IRS messages or websites.