Congressional Republicans have called for reducing our tax returns to the size of a postcard. Until that happens—and, let’s face it, anything’s possible—tax filers still have to contend with a very complex system based on over 74,000 pages of U.S. tax code. It’s an inhumanly difficult task, so beginning this tax season, H&R Block is trying something beyond human: artificial intelligence from IBM Watson.
“An outstanding tax pro knows everything,” admits Bill Cobb, H&R Block’s CEO. But outstanding pros are also rare, and all but the best tax experts can use a little help. For the majority of Block’s almost 10,000 agents, Cobb says Watson will help unearth technicalities that could help a client get esoteric benefits, such as the lifetime learning credit—a new deduction of up to $2,000 for continuing education courses. “That is a little-known credit that was just … passed by Congress last year,” adds Cobb. Block’s tax preparers have been trained on the new credit, he says, but Watson will make sure they remember it.
H&R Block has long used software to understand and navigate tax preparation. Watson isn’t replacing that system, says Cobb. Rather, it’s acting as a helper to the tax preparer and the customers. Cobb himself is no stranger to the tech industry. Before coming to Block, he was president of eBay U.S. Marketplaces.
One big benefit to the new tech is that it harnesses Block’s institutional knowledge. “This wasn’t like we dumped the tax code, 74,000 pages, on Watson and said, here, learn that,” says Cobb. On the contrary: Watson started with the same training material a human employee would get—provisions of tax code, different types of tax forms, and articles interpreting the code.
But Watson can read a lot more than a human. It can also look through hundreds of millions of interactions with customers to understand common questions they ask and solutions to individual situations. Block and IBM say Watson has digested 600 million “data points” from past filings to learn tips and tricks.
“If you’re a journalist in California, married, filing jointly, [Watson is] going to know what other journalists in California, filing jointly or not, have been able to find as deductions or credits,” says Cobb. Even the best tax pro can’t know the ins and outs of how the tax code applies to every profession, he says, but Watson can.
Despite increasing the reliance on a machine, Cobb says that Watson will help customers feel more engaged, not less, by conducing an “interview.” Customers will pose and answer questions on screen, and Watson will show how it’s using the information. “Previously … you’d come in with your information on a thumb drive or in a shoebox full of papers, sit down with your preparer, and kind of play with your phone the rest of the appointment,” says Cobb. “And the preparer might ask you some questions.” He promises that the appointment will now be an interactive experience between the customer, the preparer, and the machine.
If the robot is so smart, do you really need a human’s help? The answer already seems to be no, since Block has long offered software programs and an online service that customers can use instead of coming into an office. Many tax services, like TurboTax, are only offered as software.
Tax preparation is the latest industry that Watson is dipping into. Beyond the publicity gimmicks like an internet-connected dress, Watson’s usefulness in many applications, such as medical research, will take a long while to suss out. Cancer won’t be cured in a day or a year, and few of us are experts in oncology. But many of us contend with taxes, and we count every dollar. The refund check—or bill for underpayment—might be the easiest way for most people to judge whether Watson can make a real difference.