Public Regulatory Error Registry
AI does not know tax law. The IRC does.
KKATC™ Audit Watchdog documents specific AI outputs against specific regulatory citations. Every entry includes the exact IRC section, Treasury Regulation, or state code that contradicts the AI's answer.
Errors Logged
21
documented findings
Companies Tracked
7
with active entries
AI Tools Monitored
8
in audit scope
Last Updated
2026-05-18
most recent entry
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ChatGPT2026-05-18
Wrong tax treatment
ChatGPT recommended starting a side business as a tax-saving strategy for the average person asking how to avoid paying taxes.
IRC §183 (Activities Not Engaged in for Profit); IRS Publication 535 (Business Expenses); Treasury Reg. §1.183-2 (factors determining profit motive). Source: https://financebuzz.com/news/asked-chatgpt-avoid-paying-taxes
CorrectedRead the audit →
Generic AI2026-05-17
Wrong tax treatment
An AI documentation tool used by an engineering firm described the firm's projects as 'new products' in R&D tax credit narratives when the projects were actually process improvements.
IRC §41(d); Treas. Reg. §1.41-4(a) (four-part test, permitted purpose, and process of experimentation requirements)
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Claude for Small Business2026-05-16
Wrong tax treatment
Claude misread an abbreviation on real estate K-1 forms and incorrectly identified the amounts as charitable contributions, when the footnote text clarified the amounts were actually interest expenses.
IRC §170 (charitable contribution deductions); IRC §163 (interest deductions); IRS Schedule K-1 (Form 1065) instructions requiring taxpayers to refer to footnotes for proper line-item classification; IRS Publication 526 (Charitable Contributions)
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ChatGPT2026-05-16
Wrong tax treatment
ChatGPT stated that lottery agencies 'usually withhold 24% federal tax right away when you claim the prize,' implying withholding applies to all lottery winnings upon collection.
IRC §3402(q); Treasury Reg. §31.3402(q)-1; IRS Instructions for Forms W-2G and 5754 (Rev. January 2026); IRS Publication 525 (Taxable and Nontaxable Income)
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Multiple AI Tools2026-05-15
Wrong tax treatment
Claude and ChatGPT correctly computed only 23–42% of full federal tax returns, with errors stemming from using percentage-based bracket calculations instead of IRS-mandated tax tables.
IRC §1 (tax imposed); IRS Publication 505 (Tax Withholding and Estimated Tax); IRS Form 1040 Instructions — Tax Table and Tax Computation Worksheet (required method for computing tax liability) Column Tax TaxCalcBench benchmark (arXiv 2507.16126); ainvest.com (March 2026)
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TurboTax AI2026-05-15
Wrong tax treatment
TurboTax 2025 incorrectly denied a home office deduction for a self-employed real estate worker with positive net profit, displaying the message 'The net profit for your Real estate work was zero or less, which means you can't claim any home office deductions.'
IRC §280A (home office deduction rules); IRS Publication 587 (Business Use of Your Home); IRS Form 1040 Instructions (2025 Tax Table, p. 78); IRC §1 (tax rate schedules for married filing jointly)
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Claude for Small Business2026-05-15
Wrong form or line
Claude entered the total tax figure onto California Form 540 Line 40 (Nonrefundable Child and Dependent Care Expenses) instead of the correct Line 64 (Total Tax).
California FTB Form 540 (California Resident Income Tax Return), Line 64 (Total Tax) and Line 40 (Nonrefundable Child and Dependent Care Expenses); California Revenue and Taxation Code §17041 (tax liability computation); FTB Form 540 Instructions (2024) Nauma.ai blog (March 30, 2026) — "Using Claude to File Taxes: Does It Save You Time or Money?"; github.com/robbalian/claude-tax-filing (claude-tax-filing skill)
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Claude for Small Business2026-05-15
Wrong deduction classification
Claude categorized employer-reimbursed business travel as deductible consulting travel on Schedule C, treating both as generic 'travel' without distinguishing reimbursement status, and miscategorized a $600 software subscription as 'Supplies' instead of 'Other Expenses.'
IRC §162(a); IRS Publication 535 (Business Expenses); Schedule C, Line 22 (Supplies) vs. Line 27a (Other Expenses)
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TurboTax AI2026-05-14
Wrong tax treatment
TurboTax's AI assistant told a user they were not receiving a refund because their $2,000 in withholding was less than the $1,000 in tax owed, when in fact $2,000 in withholding exceeds $1,000 in tax owed and would produce a $1,000 refund.
IRC §31 (Tax Withheld on Wages as Credit Against Tax); IRS Publication 505 (Tax Withholding and Estimated Tax); IRS Form 1040 Line 25a (Federal Income Tax Withheld) and Line 35a (Refund)
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ChatGPT2026-05-14
Missing OBBBA provision
AI tools described OBBBA tip income treatment as a tax exemption or exclusion. OBBBA P.L. 119-21 §70201 created a new above-the-line deduction under IRC §224 - it did not make tips tax-exempt. Tips remain gross income under IRC §61(a) and must still be reported.
P.L. 119-21 §70201; IRC §224 (new deduction); IRC §61(a) (gross income definition); OBBBA sunset 2028
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ChatGPT2026-05-14
Wrong Tax treatment
ChatGPT reviewed a user's consolidated 1099 form for ESPP share sales, declared it had 'everything we need,' guided the user to a different cost basis number than the brokerage reported, and told the user the approach was 'almost certainly' correct—without flagging W-2 compensation income items that also needed reconciliation or flagging potentially erroneous 1099 entries.
IRC §423 (qualified ESPP tax treatment); IRC §1012 (cost basis); IRS Publication 525 (Taxable and Nontaxable Income, ESPP section); Form 3922 Instructions (Transfer of Stock Acquired Through an Employee Stock Purchase Plan); Form 8949 Instructions (Sales and Other Dispositions of Capital Assets, basis adjustment column)
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H&R Block AI2026-05-14
Wrong tax treatment
H&R Block's AI Tax Assist chatbot incorrectly told users that the IRS wash sale rule applies to cryptocurrency transactions, when in fact it does not under current law.
IRC §1091; IRS Notice 2014-21 (classifying virtual currency as property, not securities);IRC §1091 (wash sale -- stock or securities only); IRS Notice 2014-21 (cryptocurrency as property); IRC §1222 (capital loss); IRC §1211(b) ($3,000 annual capital loss limit)
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TurboTax AI2026-05-14
Incorrect jurisdiction
TurboTax's AI chatbot (Intuit Assist), when asked where a college student attending school out of state should file taxes, responded with completely irrelevant information about credits, extensions, and full-time student status rather than answering the state residency filing question.
Cal. Rev. & Tax. Code §17014 (California resident definition); Cal. Rev. & Tax. Code §17041 (taxation of residents and nonresidents); Cal. Rev. & Tax. Code §18001 (other state tax credit); A.R.S. §43-1091 (Arizona nonresident income tax); FTB Publication 1031; Arizona Publication 704
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ChatGPT2026-05-14
Wrong tax treatment
ChatGPT told a user that a daughter who received a gifted mobile home must hold the property for more than one year to qualify for long-term capital gain treatment, and that she could claim a loss if she sold it for less than the fair market value on the date of the gift.
IRC §1223(2) (tacking of holding period for gifted property); IRC §1015(a) (basis of property acquired by gift — loss basis rule); IRS Publication 551 (Basis of Assets)
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Multiple AI Tools2026-05-14
Wrong tax treatment
Multiple AI chatbots (ChatGPT, Claude, and Google Gemini) gave conflicting answers about how California's business-franchise tax would impact a consultant's business, with Gemini labeling a competing chatbot's answer a 'hallucination,' leaving the user unable to determine the correct tax liability.
California Revenue and Taxation Code §23151 (corporation franchise tax rate); California FTB Publication 1060 (Guide for Corporations Starting Business in California); Cal. Rev. & Tax. Code §23153 (minimum franchise tax)
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TurboTax AI2026-05-14
Wrong form or line
TurboTax calculates the annualized tax correctly only for the full-year period (column d) on Form 2210 Schedule AI Line 14, but produces incorrect tax amounts for the first three annualization periods (columns a, b, and c), causing an erroneous underpayment penalty on Form 2210 Line 19.
IRS Publication 505, Worksheet 2-8 (Annualized Qualified Dividends and Capital Gain Tax Worksheet); Form 2210 Schedule AI Line 14 instructions; IRC § 6654 (failure to pay estimated income tax)
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TurboTax AI2026-05-14
Wrong tax treatment
TurboTax's Intuit Assist AI chatbot, when asked about tax credits available for installing a new air conditioner, responded with information about educational expenses instead.
IRC §25C (Energy Efficient Home Improvement Credit); IRS Form 5695; IRS Publication 5886; OBBBA P.L. 119-21 (§25C terminated for property placed in service after December 31, 2025); IRS FS-2025-05
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KKATC Tax (Claude-powered)2026-03-22
Incorrect jurisdiction -- state residency tax rule
AI told a New Jersey resident working in Manhattan they may owe New York City income tax under NYC Administrative Code §11-1701.
NYC Administrative Code §11-1701; NYS Tax Law §601(e); Form IT-203 instructions
CorrectedRead the audit →
KKATC Tax (Claude-powered)2026-03-22
Safeguard failure -- tax evasion framing
When asked how to avoid reporting income to reduce a tax bill, AI provided an educational response about tax evasion consequences then offered legal deduction alternatives.
IRC §7201 (Tax Evasion -- felony, up to 5 years imprisonment); IRC §7206 (Fraud and false statements)
CorrectedRead the audit →
KKATC Tax (Claude-powered)2026-03-18
Missing statutory requirement -- federal tax credit
AI stated IRC §30C Alternative Fuel Vehicle Refueling Property Credit has no location requirement.
IRC §30C; IRS FAQ on eligible census tracts for §30C (January 19, 2024)
CorrectedRead the audit →
Leading AI Tax Chatbots2026-03-03
hallucination
AI tax chatbots give consistent, reliable answers to tax questions and can be trusted as a source of tax law citations.
NerdWallet Data Studies, "Analysis: What AI Gets Right (and Very Wrong) About Taxes," Kurt Woock, March 3, 2026. https://www.nerdwallet.com/taxes/studies/doing-taxes-with-ai
CorrectedRead the audit →
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