How AI Tax Preparation Works
How DynaTax AI turns bank activity into categorized, review-ready books: bank sync and statement imports, AI categorization with per-transaction confidence scores, professional review, and export into the tax software your preparer already uses.
What AI Tax Preparation Means
AI tax preparation in DynaTax AI is about the bookkeeping layer of tax work: getting every transaction into your books, categorized, and backed by a confidence score — so a licensed professional spends their time on judgment calls instead of data entry.
DynaTax AI processes your financial data and:
- Categorizes transactions into your chart of accounts and tax categories
- Assigns a confidence score to every categorization
- Flags anything uncertain for human review
- Prepares export files for professional tax software
How It Works (5 Steps)
1. Bring in your transactions
Connect your bank through secure, read-only bank sync (powered by Stripe Financial Connections, with permission to read balances and transactions only — DynaTax AI can never move money), or import statements yourself using the CSV, Excel, or QBO import.
2. AI categorizes each transaction
Categorization runs in the background after transactions arrive. The AI looks at the merchant name, description, amount, and date to assign each transaction a category. For example, a payment to an office-supply store would typically be categorized as office supplies, and an airline charge as travel — these are illustrations of the kind of mapping the AI performs, and every result can be changed on review.
3. Every result gets a confidence score
Each transaction carries a confidence score from 0–100. High-confidence results are auto-approved; everything else is queued for review (details in the next section).
4. A professional reviews the books
Your accountant or bookkeeper works through the review queue, corrects anything the AI got wrong, and adds anything it missed. Professionals can override any AI decision.
5. Export to tax software and file
When the books are ready, the professional exports the data into their tax software, completes the return there, and e-files using their own credentials.
Understanding Confidence Scores
Every AI categorization carries a confidence score, shown as a colored indicator in the transaction dashboard:
- 95 and above (green): auto-approved. The AI is highly certain, and no action is required — though you can still change any categorization.
- 70–94 (amber): needs review. The categorization is plausible but should be confirmed by a person before it is relied on.
- Below 70 (red): low confidence. The transaction is unusual or the description is unclear — review it and set the category yourself.
The review queue in the transaction dashboard collects the amber and red items so nothing uncertain slips through unexamined.
Professional Review & Export
Tax-software exports live in the professional workspace: in the pro portal, open Clients → select a client → Bookkeeping → Export. Six formats are available:
- TXF (Tax Exchange Format): for ProSeries and Lacerte — Schedule C (sole proprietor) returns only
- Drake Trial Balance: a CSV bundle for business entities (Forms 1120-S, 1065, and 1120)
- ProSeries CSV
- Lacerte CSV
- UltraTax CSV
- Generic CSV: transaction-level export usable with other tools
The export also enforces the confidence scores. If the average confidence across the data is below 60%, the export is blocked until low-confidence transactions are reviewed (firm owners and admins can bypass the block after confirming). Between 60% and 80%, the export proceeds with a warning. Above 80%, it runs clean.
E-Filing
DynaTax AI does not e-file returns itself. Professionals complete and e-file the return in their own tax software, using their own credentials, exactly as they do today. Once the return is accepted, the professional can upload the e-file acknowledgment back into DynaTax AI so the filing record lives alongside the client's books.
Security & Privacy
- Encryption: sensitive data is encrypted at rest with AES-256-GCM and in transit with TLS.
- Read-only bank access: bank connections can read balances and transactions but can never initiate payments or move money.
- Your data stays yours: DynaTax AI never sells your data.
Frequently Asked Questions
Is AI categorization accurate?
The AI is accurate on common, clearly described transactions — and honest about the rest. Every categorization carries a confidence score, and anything below the auto-approve threshold is flagged for human review, so uncertain results are surfaced rather than silently accepted.
Can the AI replace my CPA?
No. The AI handles categorization and data preparation — the tedious part. A licensed professional still reviews the books, applies tax judgment, and files the return in their own software.
What happens if the AI makes a mistake?
Any categorization can be changed at any time, and the review workflow exists precisely to catch mistakes before the data is used for a return. Low-confidence results are flagged, and exports are gated on average confidence so unreviewed data does not flow into tax software unnoticed.
Which tax software can my accountant export to?
TXF for ProSeries and Lacerte (Schedule C), a Trial Balance bundle for Drake (business entities), dedicated CSVs for ProSeries, Lacerte, and UltraTax, and a Generic CSV for anything else.
Is my data secure?
Yes. Data is encrypted with AES-256-GCM at rest and TLS in transit, bank connections are read-only, and your data is never sold.