How Magnetic Is Using AI to Rescue Overwhelmed CPAs

The U.S. tax preparation industry is facing an unprecedented workforce crisis. As experienced CPAs retire and fewer graduates pursue careers in accounting, many tax firms are left overwhelmed. During peak season, phones go unanswered, clients are turned away, and websites are taken offline just to survive the volume of incoming work. Accountants are forced to work 80+ hour weeks to meet the April 15th tax deadline.

Enter Magnetic, a San Francisco-based startup founded in 2024 and part of Y Combinator's Summer 2025 batch. Magnetic directly addresses this bottleneck by leveraging AI to eliminate one of the most time-consuming parts of a CPA’s workload: data entry.

From scribbled donation receipts to complex, multi-state K-1s, Magnetic automatically scans and processes tax documents and inputs the information into tax software. This automation saves hours per return and gives CPAs the breathing room they desperately need. It’s not just a tool — it’s a lifeline for an overstretched industry.

Who Are the Founders Behind Magnetic, and What Is Their Expertise?

Magnetic was founded by Thomas Shelley and Patrick Fay, two experienced builders with a strong track record in AI, automation, and scalable product development.

Thomas Shelley, the CEO, brings deep tax automation expertise from his time as Head of Product at Keeper (YC W19), where he created an OCR system and tax engine automation platform that handled thousands of returns with minimal manual effort. Notably, Shelley was one of the earliest to integrate OpenAI’s large language models into consumer-facing tax products, years before ChatGPT became mainstream.

Patrick Fay, Magnetic’s CTO, is a seasoned engineer who previously built hit mobile games at FunCraft and led engineering teams at Zynga. Known for his fast execution and scalable architecture, Patrick brings technical depth and speed that are rare in the AI product space.

The duo has been working together since 2017 — at Zynga, at FunCraft, and now at Magnetic. Their long-standing collaboration, complementary skillsets, and shared obsession with automation make them uniquely suited to tackle the tax industry’s bottlenecks.

How Does Magnetic’s Technology Work?

At the core of Magnetic is a proprietary AI-powered vision model specifically designed for parsing tax documents. The model ingests all types of source materials — including handwritten notes, Excel Schedule Cs, and dense PDFs — and accurately extracts structured data to feed into tax software.

This isn’t your average OCR. Magnetic’s model achieves 89% field-level accuracy, significantly outperforming the industry average of 50%. It's approaching parity with expensive human-in-the-loop services, which sit at around 92% accuracy — but at a fraction of the cost and processing time.

Magnetic’s system is also built for scale. It can handle thousands of returns without human intervention, automating over 25% of the return preparation process already. This includes identifying document types, extracting relevant financial fields, applying appropriate tax codes, and auto-filling data into tax preparation systems.

Thanks to early customer adoption and real-world testing during the 2025 tax season, the product has already processed hundreds of returns and is improving rapidly with feedback loops built into every customer interaction.

Why Is Now the Right Time for Magnetic?

The convergence of two powerful trends makes this the perfect moment for Magnetic to thrive:

1. Labor shortages in the CPA world: Fewer professionals are entering the field, and firms are desperate for tools to increase output without increasing headcount.
2. AI technology readiness: Large language models and computer vision systems have finally reached a level of performance that makes end-to-end automation of tax data extraction viable.

Furthermore, the tax software landscape is ripe for disruption. Most CPA firms still rely on clunky legacy systems that require tedious manual inputs. Outsourced data-entry services exist but are expensive, slow, and often less accurate than what Magnetic can offer today with AI.

Magnetic launched during the most stressful part of the tax year — right in the middle of tax season — and still gained strong early traction. Since then, they’ve grown their customer base over 30% month-over-month, a clear signal that demand for their product is accelerating.

What Is the Market Opportunity for Magnetic?

The size of Magnetic’s potential market is staggering. Over 80 million U.S. personal tax returns are filed by professionals each year, and CPA firms collectively spend over $2 billion annually on outsourced services for tasks that Magnetic can automate better and faster.

Many firms currently pay between $100,000 and $1 million per year for services that are inferior in both speed and accuracy. Magnetic offers an alternative that not only reduces cost but also improves turnaround time and client satisfaction.

By focusing on the B2B segment — CPA and tax preparation firms — Magnetic sidesteps the complexities of building a consumer-facing tax platform while tapping into a concentrated base of high-spending customers desperate for relief.

This isn’t just about saving time. It’s about survival. For CPA firms on the brink, Magnetic could be the difference between making it through tax season and shutting their doors.

How Is Magnetic Positioned Against Competitors?

Incumbents in the tax tech space have had decades to refine their systems, but most are tied to outdated architectures and slow update cycles. Magnetic’s edge lies in:

• Speed: Rapid development and iteration cycles from a small, elite team.
• Accuracy: A vision model that nearly doubles the accuracy of legacy systems.
• Integration: Direct interfacing with tax software means zero switching costs for clients.
• Usability: Built with real CPAs in mind, Magnetic doesn’t require new workflows or steep learning curves.

Because Thomas and Patrick have built multi-million-dollar ARR businesses before — and worked at the intersection of AI and automation for years — they have both the technical knowledge and business acumen to outmaneuver incumbents.

Most importantly, they’re relentless. According to the founders, “We’ve built this kind of software before. We’ve outworked everyone before. And we’ll do it again.”

What Does the Future Hold for Magnetic?

Magnetic is just getting started. With 25% of the return process already automated, their next milestones include:

• Reaching 95%+ field-level accuracy, surpassing human-verification benchmarks.
• Expanding to support business tax returns and other complex tax forms.
• Building APIs that let other software platforms plug into Magnetic’s infrastructure.
• Offering predictive tools that flag anomalies, suggest deductions, and improve audit defense.

There’s also a longer-term vision: building the invisible infrastructure of the modern tax firm — an AI-powered back office that automates everything from document intake to final filing, allowing CPAs to focus on high-value advisory services instead of clerical work.

If successful, Magnetic won’t just improve how taxes are done — it could completely redefine the role of a CPA in the 21st century.

Why Should the World Be Watching Magnetic?

Magnetic isn’t just another tax tech startup. It’s a calculated response to a brewing crisis in one of America’s most essential professions. By merging cutting-edge AI with deep domain knowledge and a team that knows how to ship, they’re giving CPAs what they’ve long needed but never had: time.

As the accounting world continues to digitize under pressure, Magnetic is positioned to become its automation engine — quiet, powerful, and indispensable.

Their journey began with a simple request from a friend buried under paperwork. Now, it may reshape an entire industry.