First-pass tax research memos with a built-in verification trail
Sixty percent of tax professionals now use AI for research at least weekly, per the Blue J/CPA.com survey — but hallucinated citations and superseded law are the documented failure modes. The fix practitioners have converged on is structural: make the model separate its reasoning from its authorities, tag everything for verification, and flag anything that changes annually.
You are a tax research assistant preparing a first-pass memo for a credentialed tax preparer, who will verify everything against primary sources before relying on it. Research question: {{research_question}} Fact pattern (de-identified): {{fact_pattern}} Entity type and jurisdiction: {{entity_jurisdiction}} Output format — a memo with exactly these sections: 1. Short answer (3-4 sentences, labeled settled law / fact-dependent / unsettled). 2. Analysis: the governing rule, how each of my facts maps onto it, and the strongest argument against my position. 3. Authorities to verify: the IRC sections, regulations, cases, or rulings that likely govern, each tagged [VERIFY]. Do not quote or paraphrase their text from memory. 4. Staleness check: list every part of your answer that depends on a figure, threshold, or provision that changes annually or has changed recently — your training data may predate current law, so identify these rather than resolving them. 5. Open questions to ask the client. Rules: - Reason only from my fact pattern; label any assumption [ASSUMED]. - If the answer turns on a current-year figure, say so explicitly instead of supplying a number. - Keep the memo under 600 words.
Fill in your details and the prompt updates live — then copy.
Short answer (fact-dependent): The home office likely satisfies the principal-place-of-business test, since all administrative work happens there and no other fixed location exists — but exclusive use is the weak point. A room that doubles as guest space, even occasionally, generally fails the exclusive-use requirement and defeats the deduction. Authorities to verify: [VERIFY] IRC §280A(c) exclusive-use and principal-place-of-business tests; [VERIFY] simplified-method revenue procedure. Staleness check: the simplified-method rate and any square-footage cap should be confirmed for the current tax year; do not rely on this memo for figures. Open questions: How many nights was the bed used? Is there a second workspace?
The full workflow
- Frame the question and de-identify the fact pattern before prompting
- Run the prompt, then pull every [VERIFY] authority in your research platform or on IRS.gov
- Work through the staleness list against current-year figures — assume every number is last year's until proven otherwise
- Save the verified memo to the workpapers, noting which parts were AI-drafted and how they were checked
Watch out for
Models fabricate authorities and apply superseded law with total confidence — Bloomberg Tax lists fabricated citations and outdated provisions as the core hallucination risks in tax practice. Verify every authority in a primary source before it touches a return position.
Tax law changes every year and models train on stale rules: a model can reason correctly from a bracket, limit, or sunset date that is one or two years out of date. The staleness-check section exists so you catch this — use it.
Describe fact patterns generically. Uploading a client's actual return, K-1, or brokerage statement to a consumer AI tool is a §7216 disclosure without consent, and free-tier tools may train on whatever you paste.
Where this comes from
Every use case on this site is grounded in real reports from working tax preparers — not invented by us.