H&R Block enlists IBM’s Watson to support its 80,000 tax pros

H&R Block tax professional with Watson

Can you deduct the cost of your Super Bowl party?

We can’t answer that question, but there are about 80,000 people at H&R Block Inc. who can. Beginning this week, they’ll be joined by the digital assistant called Watson.

A collaboration between IBM Corp. and the tax-preparation giant will fold Watson into the individual tax preparation process in the hopes of surfacing more deductions and building a knowledge base that will set H&R Block apart from its competition. The service kicks off on Sunday with a first-quarter Super Bowl TV ad, H&R Block’s first in eight years. “This is the future of tax preparation,” said George Costello, the company’s vice president of client experience and product management.

H&R Block insist that the Watson initiative is not intended to ultimately replace human tax preparers. “The heart and soul of our business are 80,000 tax professionals,” Costello said. “They will always be the core of what we do.”

Preserving human knowledge

Rather, the company sees Watson as a potential game-changer in an industry in which its greatest asset – human knowledge – walks out the door every night. H&R Block’s two biggest competitors are online self-preparation services like Intuit Inc.’s TurboTax and tens of thousands of independent tax accountants (the company offers its own online self-preparation service). H&R Block believes that by using Watson to capture the knowledge of its most experienced tax pros, it can speed up the on-boarding of junior staff and boost its promise of getting its 12 million clients the largest possible refund. Watson can also help agents interpret the 74,000-page federal tax code and the thousands of pages of additions and amendments that are filed each year.

“We know that half of the people who do their own taxes with software get things wrong,” Costello said. “We believe that by deploying Watson, we will make people more inclined to come in to an H&R Block location.” The company could use a jolt. Its stock is 40 percent below its late-2015 high.

Little will change for the tax preparer once Watson enters the picture. But the consumer experience will be transformed by the introduction of a 23-inch monitor that will enable them to follow tax professionals as they navigate through a year of income and expenses.

Watson will work on the back end to prompt the tax pro with knowledge it’s gained through six months of what Costello called “cognitive interviews,” in which experienced accountants walked the computer through thousands of questions and topics that are typically discussed during the return filing process. Watson’s role will be to “understand context, interpret intent and draw connections between clients’ statements and relevant areas of their return,” the companies said in a statement.

Bigger refunds expected

The addition of Watson won’t make tax preparation any faster, but it will make it more thorough and result in bigger refunds, H&R Block says. Watson will prompt accountants to ask questions that they might otherwise overlook and probe for clarity. “It’s interpreting the intent of what the client is saying and identifying areas where we know there are benefits,” Costello said.

H&R Block expects Watson’s role to expand as it builds its knowledge base. This year it will mainly advise the tax preparer. Beginning next year, it’s expected to deliver tax tips to individual filers. “As it gets smarter, it will go deeper into individual deductions,” Costello said.

In stressing Watson’s role as adviser rather than replacement for tax professionals, IBM is continuing to separate itself from the growing debate over whether artificial intelligence will ultimately do more harm than good by idling large numbers of knowledge professionals. IBM Chief Executive Virginia Rometty last month issued a set of “Principles for the Cognitive Era” that she said should guide ethical use of technology to augment human intelligence rather than eliminate jobs.

Photo courtesy of IBM