Problem

Magnetic solves the capacity and accuracy bottleneck in professional tax preparation. CPA firms can spend tax season working 80-plus-hour weeks, turning away clients, and missing deadlines—not because demand is lacking, but because experienced staff are buried in repetitive preparation and data-entry work. The pain goes well beyond reading forms: real returns require reconciling information across documents, carrying data forward, handling related entities and exceptions, interpreting ambiguous files, and making judgment calls. The killer use case is preparing difficult individual returns containing messy Schedule Cs, handwritten notes, spreadsheets, receipts, and multi-state K-1s without forcing a partner or reviewer to redo the work from scratch.

The economics are meaningful. Magnetic cites an opportunity involving approximately 80 million U.S. personal returns filed through professionals annually and a $2 billion outsourcing market, while individual CPA firms may pay $100,000 to $1 million per year for inferior services. The product is therefore aimed at expanding firm capacity, reducing costly errors and manual labor, and enabling firms to serve more clients with the teams they already have.

Product / Service

Magnetic is an agentic tax-preparation platform delivered to CPA firms through a portal: firms upload client documents and a pro forma tax file, and Magnetic returns an updated file plus review workpapers. Its AI reasons across the full document set rather than merely performing OCR, compares sources, performs calculations, consults IRS instructions when needed, flags ambiguity, and enters data directly into tax software while preserving the firm’s file history and formatting conventions. The platform supports varied inputs, including PDFs, Excel files, scans, phone photos, Outlook files, organizers, and handwritten materials, and enters returns into five leading tax engines.

The delivery model is explicitly human-plus-AI. After the agent prepares a return, a U.S.-based licensed EA or CPA reviews the work, resolves flagged items, and signs off before delivery; Magnetic also runs a final automated check against source documents. The intended benefit is trusted, near-finished work that reduces partner review to judgment calls and client-specific questions. Magnetic reports 99.9% field-level scan accuracy and 77% time saved per return, with a goal of making even complex returns reviewable in a much shorter window.

Market

Magnetic competes in AI tax preparation, tax-document automation, and outsourced tax workflow services for CPA and professional tax firms. Its broader opportunity is the professional 1040 preparation and tax-outsourcing market. Adjacent competitors include Thomson Reuters’ SurePrep, which automates gathering, preparing, reviewing, and delivering 1040 returns, and GruntWorx, which automates tax-document organization, extraction, and verification. Magnetic’s positioning is differentiated from narrower extraction tools by emphasizing full-return coverage, reasoning across messy documents, direct entry into existing tax software, audit trails, and expert review.

The company appears to have early commercial traction rather than being merely pre-product: its website reports more than 60 firms onboarded, 99.9% field-level scan accuracy, and 77% time saved per return. Y Combinator lists Magnetic as an active Summer 2025 company founded in 2024, with 10 employees in San Francisco, and describes its core product as automatically scanning client documents and entering them into tax software for CPA firms. The available materials do not establish revenue, but the onboarding and usage metrics indicate live firm adoption.