How AI and Automation Are Shaping the Future of Tax Preparation Software

15 May
2025

6585 Views

Key takeaways:

Introduction
Rising use of AI and automation
Product launches in the market

Tax preparation software is an application program developed to help individuals, businesses, corporate entities, non-governmental organizations, and civil societies file their taxes. Almost all countries across the globe levy taxes in proportion to the income and expenditure of the taxpayer. Since businesses and corporate houses earn revenue from multiple sources and spend their money on various projects, initiatives, services, and production processes, the task of calculating the tax amount becomes extremely cumbersome and tedious. In such a scenario, tax preparation software helps simplify tax filing activities, thereby improving the overall productivity of the firm. Over the years, several financial organizations have started transitioning toward tax preparation software applications to improve their efficiency and address the needs of their clients comprehensively.

Integration of automation tools in tax preparation software applications

In recent times, the popularity of tax preparation programs among financial institutions and corporate houses has increased drastically. As per the 2023 State of the Tax Professionals Report, the operational efficiency offered by these digital tools has led to a surge in their demand from accounting firms. As a result, software developers and IT firms have started focusing on designing advanced applications that cater to the evolving industry demands holistically. The integration of automation tools is one of the most innovative developments in the industry in the last few years.

Tax preparation software powered by automation solutions aids in gathering data from multiple sources, including bank accounts and investment returns. Moreover, the use of APIs helps transfer all the data into the software, thereby streamlining complicated tasks related to information capturing. These applications also feature algorithms that can detect discrepancies and inconsistencies related to revenue sources and expenditures, thus reducing the number of errors in tax filing processes. The use of automation also aids in determining whether the client is complying with all the necessary regulatory norms.

Increasing investments in innovative tax preparation software applications

The tax preparation software industry accounted for $17.6 billion in 2024 and is anticipated to generate a revenue of $43 billion by 2034, citing a CAGR of 9.2% during 2025-2034. In the last few years, several leading IT businesses and technology companies have launched innovative products in the sector to strengthen their position globally. For instance, in November 2023, Thomson Reuters, a multinational business information services company, unveiled new updates to its suite of tax preparation and filing solutions. The press release issued by the company highlighted that the latest additions to these products mainly focus on integrating AI and automation tools to improve their efficiency. SurePrep TaxCaddy, the taxpayer collaboration software developed by Thomson Reuters, has been upgraded to include document auto-categorization features, which aid in simplifying tax preparation processes. Moreover, the use of AI tools and machine learning algorithms added to this application assists tax professionals in detecting anomalies.

Similarly, in December 2024, Corvee, a tax planning software developer, announced the launch of a new tax preparation system. As per the press statement issued by the firm, the platform will help companies in e-filing of 1065, 1120, 1120S, 1040, and 1041 forms, necessary for tax compliance in the US. Launched under the banner of ‘Instead’ Brand, this solution will help automate about 80% of the processes related to tax filing.

Summing up, the tax preparation software industry is expected to experience significant growth in the next few years, owing to the rising demand for digital tools to simplify accounting processes. Moreover, the integration of automation solutions and AI is expected to create favorable conditions for the growth of the landscape in the coming period.

Get in touch with our experts for more information on the evolving dynamics of the tax preparation software market!

Akhilesh Prabhugaonkar

Author's Bio- Akhilesh Prabhugaonkar holds a bachelor’s degree in Electronics Engineering from the reputed Vishwakarma Institute of Technology. He has a special interest in the fields of forensics, world history, international relations and foreign policy, sports, agriculture, astronomy, security, and oceanography. An ardent bibliophile and melophile, Akhilesh loves to write on topics of his interest and various other societal issues. This love for writing made him enter the professional world of content writing and pursue his career in this direction.

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