The Future of Tax Representation: Why You Need an Enrolled Agent When AI Gets Your Taxes Wrong

By Mike Habib, EA | Los Angeles, California

Let me start with a confession: I spend a significant amount of my time fixing problems that AI created.

Not because AI is inherently bad. Not because I’m some technology-hating tax professional stuck in the past. But because AI—as incredible as it is—doesn’t understand the one thing that matters most in taxation: context.

I’m Mike Habib, an Enrolled Agent based in Los Angeles, and I’ve been representing individual taxpayers, business owners, and US expats globally for over 20 years. And in the last three years, I’ve watched a fascinating phenomenon unfold: more people are using AI tools for tax advice than ever before. And more people are ending up in trouble because of it.

Welcome to the complicated relationship between artificial intelligence and tax representation. Let me explain why you need to understand both—and why having a real Enrolled Agent matters more now than ever.

What Even is an Enrolled Agent? (And Why It Matters More in the AI Era)

Before we dive into the AI discussion, let’s talk about what I actually am and why it matters to you.

An Enrolled Agent (EA) is a federally licensed tax practitioner who has unlimited rights to represent taxpayers before the Internal Revenue Service. We can represent any taxpayer, for any tax matter, before any IRS office, anywhere in the United States.

Think of it this way:

• CPAs are licensed by states and focus primarily on accounting
• Tax attorneys are licensed by states and focus on legal matters
• Enrolled Agents are licensed by the federal government and focus exclusively on taxation

We’re the tax specialists. It’s literally all we do.

To become an EA, I had to pass a comprehensive three-part exam covering individual and business tax returns, undergo a background check, and commit to 72 hours of continuing education every three years. The IRS doesn’t hand out these credentials lightly.

But here’s why this matters in 2024: AI can answer tax questions. It can fill out forms. It can even give you advice that sounds authoritative.

But AI cannot represent you before the IRS.

When you get that audit notice, when the IRS disagrees with your return, when you’re facing penalties or collections—your ChatGPT conversation history isn’t going to help you.

That’s when you need an EA.

The Problem I’m Seeing Every Single Week

Let me paint you a picture of what’s happening out there.

Last month, a software engineer came to my Los Angeles office. Smart guy, works for a major tech company, makes good money. He’d used an AI chatbot to help prepare his tax return. The AI was free, fast, and gave him detailed answers to all his questions.

The AI confidently told him:

• He could deduct his entire home internet bill because he occasionally worked from home
• His cryptocurrency transactions under $600 didn’t need to be reported
• He didn’t qualify for the Qualified Business Income deduction on his side hustle

All three were wrong.

He’d taken a deduction that could trigger an audit, failed to report taxable transactions (crypto transactions are ALL reportable regardless of amount), and missed out on a legitimate deduction worth about $3,400.

This wasn’t his fault. The AI sounded authoritative. It provided detailed explanations. It seemed like it knew what it was talking about.

But it didn’t understand HIS specific situation. And that’s the fundamental problem with AI tax advice.

Where AI Actually Helps (And Where It Fails Spectacularly)

Look, I’m not anti-technology. I use computers, the internet, and tax software just like everyone else. AI can be genuinely helpful for certain things.

Where AI Can Help:

• Understanding basic tax concepts and definitions
• Getting general information about tax forms
• Learning about common deductions and credits
• Organizing your documents and receipts
• Generating lists of potential tax planning ideas
• Explaining tax terminology in plain English

Where AI Fails Miserably:

• Understanding YOUR specific, unique tax situation
• Navigating complex scenarios with multiple variables
• Knowing when exceptions to general rules apply
• Providing strategic tax planning advice
• Representing you before the IRS
• Taking legal responsibility for mistakes
• Understanding recent tax law changes or pending legislation
• Interpreting nuanced IRS guidance and court decisions

Let me give you a real example that illustrates this perfectly.

The Case of the “Helpful” AI Advice

I had a client—let’s call her Sarah—who was a US citizen teaching in South Korea. She made about $85,000 per year and had been using an AI tool to help with her taxes.

Sarah asked the AI: “Do I need to pay US taxes on my Korean income?”

The AI answered: “Generally, if you earn income while living abroad, you may qualify for the Foreign Earned Income Exclusion, which excludes up to $112,000 of foreign earned income from US taxation.”

That sounds helpful, right? The information is technically accurate.

But here’s what the AI DIDN’T tell her:

• She still needs to FILE a US tax return even if she owes nothing
• She needs to file an FBAR (Foreign Bank Account Report) if her Korean bank accounts exceed $10,000
• She may need to file FATCA forms (Form 8938)
• She needs to make an election to use the Foreign Earned Income Exclusion
• She might be better off using the Foreign Tax Credit instead, depending on her situation
• She has self-employment income from private tutoring that changes everything
• Failure to file the FBAR can result in penalties starting at $10,000 per year

Sarah had been following the AI’s advice for three years. When she finally came to me, she was facing potential penalties of over $30,000 for failing to file required forms—forms the AI never mentioned.

The AI gave her accurate information. But it didn’t give her COMPLETE information. And in taxation, incomplete information can be financially devastating.

Why “Just Googling It” or “Asking AI” Isn’t Enough

I completely understand the appeal of AI for tax questions. It’s:

• Free (or cheap)
• Available 24/7
• Gives you answers immediately
• Doesn’t make you feel stupid for asking basic questions
• Sounds confident and authoritative

But here’s what most people don’t realize: AI doesn’t know what it doesn’t know.

When I consult with a client, I ask dozens of follow-up questions:

• “Did you sell any investments this year?”
• “Do you have any foreign bank accounts?”
• “Did you receive any 1099-K forms?”
• “Are you planning any major purchases next year?”
• “Did your marital status change?”
• “Do you have any rental properties?”
• “Did you start or close a business?”

These questions matter because the answers completely change your tax situation. AI doesn’t know to ask these questions unless you specifically mention these topics.

It’s like going to a doctor who only treats the symptom you mention instead of doing a full examination. You might get relief for your headache, but miss the underlying condition causing it.

Real Scenarios Where AI Got It Wrong (And I Had to Fix It)

Let me share some recent cases where AI advice created problems that required EA representation to resolve:

Case 1: The Multi-State Remote Worker

Situation: Marketing executive living in California who worked remotely for a New York company and spent three months working from her parents’ house in Florida.

AI Advice: “You’ll need to file returns in California and New York.”

What AI Missed:

• Temporary work location rules
• State residency determination factors
• Convenience of employer rules (New York has aggressive taxation policies)
• Potential for being taxed by three states on the same income
• Strategies to minimize multi-state taxation

Result Without EA: She would’ve overpaid about $18,000 in state taxes.

What I Did: Analyzed her situation, determined she’d established temporary residency in Florida, negotiated with California FTB about her residency status, and filed protective claims in multiple states.

Case 2: The Cryptocurrency Trader

Situation: Tech worker who made $240,000 trading cryptocurrency across 5 different exchanges with thousands of transactions. Received an IRS audit notice.

AI Advice: “You need to report cryptocurrency gains and losses on Schedule D.”

What AI Missed:

• Different cost basis methods (FIFO, LIFO, HIFO) produce vastly different results
• Wash sale rules may apply to crypto transactions
• Proper documentation requirements for cost basis
• How to respond to IRS audit notices
• Which exchanges provide accurate tax documents vs. which require manual calculation

Result Without EA: He was facing an IRS adjustment claiming he underreported $180,000 in gains.

What I Did: Represented him in the audit, calculated accurate cost basis using proper methods, provided documentation supporting our position, and negotiated a settlement. Final adjustment: He owed $3,200 instead of the IRS’s claimed $62,000.

Case 3: The Business Owner Who Believed AI About Deductions

Situation: Owner of a small marketing agency who asked AI about business deductions.

AI Advice: Listed 30+ potential business deductions including meals, entertainment, home office, vehicle expenses, travel, etc.

What AI Missed:

• Documentation requirements for each type of deduction
• Percentage limitations on certain expenses
• Which expenses require contemporaneous records
• The difference between “allowable” and “advisable” deductions
• Red flags that increase audit risk

Result Without EA: She deducted everything the AI suggested, triggering an audit flag – that questioned $47,000 in deductions.

What I Did: Helped her avoid an audit, accounted for legitimate expenses, withdrew questionable deductions, and explained her good-faith reliance on advice. Result: $8,000 in adjustments instead of $47,000, and no penalties.

The Four Things AI Will Never Be Able to Do

As technology advances, AI will certainly get better at many tasks. But there are four things AI will never be able to do in the tax world:

1. Sign Your Return and Take Legal Responsibility

When I prepare and sign a tax return as an Enrolled Agent, I’m taking professional responsibility for that return. My license is on the line. I carry malpractice insurance. If something goes wrong because of my advice, I’m accountable.

AI has no accountability. When it gives you wrong information, there’s no recourse. You can’t sue ChatGPT. You can’t file a malpractice claim against an algorithm.

2. Represent You Before the IRS

This is the big one. When the IRS sends you a notice, AI cannot:

• Call the IRS on your behalf
• Negotiate settlements
• Represent you in audits
• File appeals
• Appear at IRS hearings
• Submit power of attorney forms
• Access your IRS account information

Only Enrolled Agents, CPAs, and tax attorneys can do these things. And among these, EAs are the only ones whose entire practice focuses exclusively on taxation.

3. Apply Professional Judgment to Gray Areas

The tax code is full of ambiguity. Terms like “ordinary and necessary,” “reasonable compensation,” and “principal place of business” require interpretation and judgment.

I recently had a client who runs a YouTube channel. Is her ring light a business expense? What about her makeup? Her gym membership (she films fitness content)? Her vacations (she vlogs while traveling)?

The answer to all of these is: it depends.

AI can tell you the rules. But it can’t apply professional judgment to determine whether YOUR specific situation meets those rules in a way that will withstand IRS scrutiny.

4. Adapt to Your Changing Life Circumstances

Your tax situation isn’t static. You get married, have kids, change jobs, start businesses, buy property, move states, inherit money, face health issues. Each of these events has tax implications that interact with your overall financial picture.

I work with clients year after year, understanding their long-term goals and planning accordingly. AI doesn’t remember you. Each conversation is isolated. It can’t provide strategic, multi-year tax planning.

What You SHOULD Use AI For (Yes, Really)

Despite everything I’ve said, AI can be genuinely useful if you understand its limitations. Here’s how I tell my clients to use AI tools:

DO Use AI To:

• Learn basic tax concepts and terminology
• Get a general understanding before talking to a professional
• Organize your tax documents and receipts
• Generate a preliminary list of questions to ask your EA
• Understand IRS notices before calling a professional
• Research general tax topics for your own education

DON’T Use AI To:

• Make final decisions about your tax strategy
• Determine if you qualify for deductions or credits
• Prepare your actual tax return (without professional review)
• Respond to IRS notices
• Navigate complex or unusual tax situations
• Get advice about specific dollar amounts or filing positions

Think of AI as a helpful research assistant, not as a tax professional.

The Real Cost of “Free” AI Tax Advice

Here’s something most people don’t consider: the cost of wrong advice far exceeds the cost of professional services.

That software engineer I mentioned at the beginning? He saved maybe $500 by not hiring a professional. But his mistakes would’ve cost him:

• $3,400 in missed deductions
• Potential audit risk worth thousands in professional fees
• Unreported crypto transactions that could trigger penalties
• Time and stress dealing with IRS notices

My fee to prepare his return correctly? $650.

The expat teacher in South Korea? She thought she was saving money by using free AI advice. The cost of her non-compliance? Potential penalties of $30,000+. My fee to get her into compliance? $1,800.

This isn’t about scaring people. It’s about understanding that taxation is serious business. The IRS has real enforcement power. Mistakes have real consequences.

How to Work With an EA in the Age of AI

Here’s my recommended approach for savvy taxpayers who want to leverage technology while protecting themselves:

Throughout the Year:

• Use apps and tools to track expenses and receipts
• Organize your financial documents digitally
• Use AI to understand tax concepts you’re curious about
• Keep notes about major financial events or questions

Before Tax Season:

• Compile all your information
• Use AI to generate a list of questions you have
• Make a list of any major life changes or financial events

During Tax Season:

• Hire an EA to prepare your return
• Share all the information you’ve gathered
• Ask all the questions you’ve researched
• Get professional advice on your specific situation

After Filing:

• Keep your EA’s contact information handy
• Forward any IRS notices immediately (don’t try to handle them yourself)
• Schedule planning consultations for major financial decisions
• Ask your EA about year-round tax planning strategies

This approach gives you the efficiency of technology with the protection of professional expertise.

Why Being Based in Los Angeles Doesn’t Matter (But Being an EA Does)

Here’s something interesting about my practice: I rarely meet clients in person anymore.

I work with:

• Tech workers in San Francisco and Seattle
• Business owners in Miami and Austin
• Expats in Dubai, London, Tokyo, Singapore, and Sydney
• Digital nomads without permanent addresses
• Remote workers scattered across all 50 states

The beauty of modern practice is that location doesn’t matter. What matters is credentials and expertise.

You don’t need a tax professional down the street. You need a qualified Enrolled Agent who understands your situation—whether you’re in California, Maine, or Manila.

Video consultations, secure document sharing, encrypted messaging, and electronic signatures make distance irrelevant. And when I represent you before the IRS, I do it from my Los Angeles office, but it’s just as effective as if I were in your hometown.

The IRS doesn’t care where your EA is located. They care that you’re properly represented.

Common Questions About EAs vs. AI

Who Absolutely Needs an EA (Not Just AI)

While anyone can benefit from professional representation, certain situations require it:

You Definitely Need an EA If:

• You’re facing an IRS audit, notice, or collections action
• You’re a US citizen living abroad (expat tax is extremely complex)
• You own a business or are self-employed
• You have rental properties or investment real estate
• You trade cryptocurrency or have complex investments
• You work in multiple states or moved during the year
• You have foreign bank accounts or foreign income
• You’re going through major life changes (divorce, inheritance, business sale)
• You’ve made tax mistakes in previous years that need correction
• You’re making more than $150,000 per year (complexity increases with income)

For these situations, AI might give you some helpful information, but you need professional representation to get it right.

What Working With Me Actually Looks Like

Since we’ve spent this whole article talking about AI vs. professional services, let me explain what working with an Enrolled Agent actually involves:

Initial Consultation (Usually 30-60 minutes):

• We discuss your situation in detail
• I ask lots of questions AI wouldn’t know to ask
• I identify potential issues and opportunities
• I give you a clear explanation of your options
• You decide if you want to move forward

If You Hire Me:

• I gather all necessary information and documents
• I prepare your return with professional judgment applied to every decision
• I explain anything you don’t understand
• I file your return and provide you with copies
• I remain available for follow-up questions

If Issues Arise:

• Forward me any IRS notices immediately
• I analyze the situation and explain what’s happening
• I represent you in all communications with the IRS
• I negotiate on your behalf to achieve the best possible outcome
• I keep you informed throughout the process

Ongoing Relationship:

• I’m available year-round for tax questions
• I provide proactive planning advice for major decisions
• I help you understand how life changes affect your taxes
• I keep your information on file for easy future filing

This is what AI cannot do: be a trusted advisor who knows your situation and looks out for your interests.

The Bottom Line: AI Is a Tool, Not a Replacement

Here’s my final take on AI and taxation:

AI is impressive technology. It’s useful for many things. It will continue to improve. And it has a legitimate place in how we handle tax information.

But AI is a tool, not a licensed tax professional.

You wouldn’t perform surgery on yourself after watching YouTube videos. You wouldn’t represent yourself in court after reading legal blogs. And you shouldn’t navigate complex tax situations using only AI advice.

The cost of professional representation is real. But the cost of mistakes is far higher.

I’ve spent 20 years as an Enrolled Agent helping individuals, businesses, and expats navigate their tax obligations. I’ve represented hundreds of clients before the IRS. I’ve saved clients millions of dollars in taxes, penalties, and interest.

And I’ve cleaned up countless messes created by people who thought they could handle it themselves with free online tools.

You deserve better than that.

You deserve professional representation from someone who:

• Has the credentials and legal authority to represent you
• Takes professional responsibility for their advice
• Understands the nuances of tax law
• Can negotiate with the IRS on your behalf
• Provides strategic planning for your long-term benefit

That’s what an Enrolled Agent offers. That’s what AI never will.

Let’s Talk About Your Situation

Whether you’re dealing with:

• Questions about AI tax advice you’ve received
• A current IRS issue that needs professional representation
• A complex tax situation that DIY software can’t handle
• International tax scenarios as a US expat
• Business tax planning that needs strategic thinking
• Or you just want a second opinion on a return you prepared

I’d be happy to discuss your situation.

The initial consultation is straightforward: we talk about your situation, I give you honest advice about your options, and you decide if you want to move forward. Sometimes you don’t even need my help—and I’ll tell you that honestly.

Because at the end of the day, my job isn’t to scare you away from technology. It’s to make sure you understand when that technology is helpful and when you need human expertise.

AI is a tool. A useful one. But when it comes to your taxes, your financial security, and your legal standing with the IRS?

You need more than a tool. You need a licensed tax professional.

Contact us today at 1-877-78-TAXES [1-877-788-2937]. Or ONLINE.

Mike Habib, EA
Enrolled Agent | Tax Representation & Resolution
Serving Individual & Business Taxpayers Nationwide | US Expats Globally
Based in Los Angeles, California

AI can give you information. An Enrolled Agent gives you representation. Know the difference.