IBM’s Watson Joins with H&R Block for Better Tax Preparation

IBM struck a deal with H&R Block to utilize Watson to help the company’s 70,000 tax professionals at 10,000 branch offices file taxes for 11 million customers. The partnership, which was presented in a 60-second Super Bowl ad on Sunday, began last summer when H&R Block chief executive Bill Cobb contacted IBM. His goal was to aid the company’s professionals in increasing tax refunds and reducing tax liabilities for the company’s clients, and make the experience “engaging and interactive.”

The New York Times reports that, “the technology was tested in about 100 H&R Block offices in January, and it will be available throughout the company’s retail network next week.”


Cobb says when he first reached out to IBM, he learned that Watson would have to be trained over time. Watson first digested “the 74,000 pages of the federal tax code and thousands of tax-related questions culled from H&R Block’s data, accumulated over six decades of preparing tax returns.”

Next, H&R Block tax preparers trained Watson, by approving when it asked a smart question and correcting it when the question was “off base.” “Watson will become a really smart, virtual assistant,” said IBM Watson executive David Kenny.

Cobb says that clients will be able to watch the the interaction of suggestions and questions on a screen while the tax professional works, assisted by Watson. NYT notes that the real test will come next year when H&R Block sees how many customers return.

Northcoast Research analyst Kartik Mehta explained that H&R Block’s retention rate is 75 percent. “If they can get that 75 percent up to 80 percent, it’s a big deal for H&R Block,” he said.

IBM’s Kenny notes that this is just “phase one” of the partnership. “It’s crawl, walk, run learning,” he said. “But the pace of the Watson learning is so much faster than humans.”

IBM’s corporate-focused strategy for its AI software is markedly different from Apple, Amazon, Microsoft and Google whose digital assistants are aimed directly at the consumer market. IDC predicts that, by 2018, 75 percent of new business software will include AI features.

IBM is counting on Watson to revitalize its own business, after it reported, two weeks ago, “its 19th consecutive quarter of declining revenue.” In Q4 2016, however, IBM’s new businesses, including Watson, grew 14 percent, accounting for 41 percent of total revenue. IBM previously estimated that the newer businesses segment wouldn’t reach 40 percent until 2018.

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