Magnetic
AI tax preparer auto-enters data from docs into legacy tax software with 90%+ accuracy
Website: https://magnetictax.com
Cover Block
| Name | Magnetic |
| Tagline | AI tax preparer auto-enters data from docs into legacy tax software with 90%+ accuracy [Y Combinator, June 2025] |
| Headquarters | San Francisco |
| Founded | 2024 [Y Combinator, June 2025] |
| Stage | Seed |
| Business Model | SaaS |
| Industry | Fintech |
| Technology | AI / Machine Learning |
| Geography | North America |
| Growth Profile | Venture Scale |
| Founding Team | Co-Founders (2) [Y Combinator, June 2025] |
| Funding Label | Undisclosed |
| Total Disclosed | (undisclosed) |
Links
- Website: https://www.magnetictax.com
- X / Twitter: https://www.ycombinator.com/companies/magnetic
Summary and Signal
Magnetic is a seed-stage AI startup automating the manual data entry that burdens CPA firms during tax season [Y Combinator, June 2025]. The company, founded in 2024, emerged from Y Combinator's Summer 2025 batch with an undisclosed seed investment [Y Combinator, June 2025]. Its product scans a wide range of client documents and attempts to auto-populate fields in legacy tax preparation software like UltraTax and Drake with a claimed accuracy exceeding 90% [Y Combinator, June 2025].
The founding team, Thomas Shelley and Patrick Fay, brings prior experience in tax software automation; Shelley previously led product at tax-focused startup Keeper, where he worked on OCR and tax engine systems [promptloop.com, 2026]. The business model is SaaS, targeting accounting firms as a workflow efficiency tool.
Data Accuracy: YELLOW -- Core product claims and YC affiliation are confirmed; founder backgrounds and company details are sourced from secondary profiles.
Taxonomy Snapshot
| Axis | Value |
|---|---|
| Stage | Seed |
| Business Model | SaaS |
| Industry / Vertical | Fintech |
| Technology Type | AI / Machine Learning |
| Geography | North America |
| Growth Profile | Venture Scale |
| Founding Team | Co-Founders (2) |
Company Overview
Magnetic was founded in 2024 to automate tax preparation for professional accounting firms [Y Combinator, June 2025]. The company is headquartered in San Francisco and operates as a two-person team [Y Combinator, June 2025]. Its primary milestone to date is acceptance into the Y Combinator Summer 2025 batch, which included an undisclosed seed investment [Y Combinator, June 2025].
The founding team, Thomas Shelley and Patrick Fay, has a background in building tax-related software. Shelley previously served as Head of Product at Keeper (YC W19), where he developed tax engine automation and document scanning tools [promptloop.com, 2026]. The team claims prior experience building software used by millions of people and processing tens of thousands of tax returns [Magnetic, 2026].
Data Accuracy: YELLOW -- Key facts (founding year, YC participation) confirmed by Y Combinator. Team background and prior work claims are sourced from third-party directories and the company's own site, lacking independent corroboration.
The Product and the Stack
The core proposition is to automate the most tedious and error-prone step in professional tax preparation. Magnetic's AI is designed to scan a wide range of client-provided documents and automatically populate the corresponding fields in legacy tax preparation software. The company claims this can be done with over 90% field-level accuracy [Y Combinator, June 2025].
The product's technical scope extends beyond simple optical character recognition, referencing tax code and handling specific calculations like state tax-exempt interest allocation [Y Combinator, June 2025]. The initial integration targets are established platforms like UltraTax, Drake, and Intuit ProConnect. The founding team's prior experience at Keeper provides a logical foundation for the technology stack [promptloop.com, 2026].
Data Accuracy: YELLOW -- Product claims are sourced from the company's Y Combinator profile; technical feasibility is inferred from founder background.
The Market They Are Entering
The market for automating tax preparation is defined by a persistent labor shortage and a growing complexity in tax documents. According to a 2024 report from Grand View Research, the global tax management software market was valued at $20.1 billion in 2023 and is projected to grow at a compound annual rate of 11.2% through 2030 [Grand View Research, 2024].
The primary demand driver is a well-documented shortage of qualified tax professionals. The American Institute of CPAs has noted a steady decline in the number of accounting graduates entering the profession over the past decade [AICPA, 2023]. A secondary driver is the increasing volume and complexity of client data, which extends the time required for manual data entry and review.
Data Accuracy: YELLOW -- Market sizing is based on analogous, broader industry reports. Demand drivers are cited from established industry bodies.
The Competitive Field
| Company | Positioning | Stage / Funding | Notable Differentiator | Source |
|---|---|---|---|---|
| Magnetic | AI data-entry layer for legacy tax software (UltraTax, Drake) | Seed (YC S25) | Targets CPA firms with 90%+ field-level accuracy on diverse document types [Y Combinator, June 2025] | [Y Combinator, June 2025] |
The competitive landscape includes incumbent tax software providers like Thomson Reuters (UltraTax), Intuit (ProConnect), and Drake Software, which represent both the technical environment and potential future competitive threats. Venture-backed challengers like Black Ore, Filed, and Basis aim to modernize parts of the tax workflow. Magnetic's positioning as an AI layer for data entry into existing software suggests it views these challengers as adjacent players.
Data Accuracy: YELLOW -- Competitor positioning sourced from Crunchbase; Magnetic's claims are from its YC profile.
Opportunity
Magnetic could capture a material share of the manual tax preparation labor market. The headline opportunity is to become the default data ingestion layer for the professional tax industry. The outcome is the intelligent pipe that connects client documentation to the legacy systems firms already use.
| Scenario | What happens | Catalyst | Why it's plausible |
|---|---|---|---|
| Platform Expansion | Magnetic moves beyond data entry to become a full workflow orchestration layer. | A strategic partnership with a major tax software provider to offer Magnetic as a certified, embedded solution. | The founding team's prior experience building tax engine automation systems suggests capability in navigating this ecosystem [promptloop.com, 2026]. |
| Vertical Specialization | The company achieves dominance in a high-complexity niche, such as partnership (K-1) or multi-state tax preparation. | Securing a marquee customer that publicly credits the tool for drastic efficiency gains. | The product's cited ability to handle complex returns indicates initial targeting of high-complexity niches [Y Combinator, June 2025]. |
Data Accuracy: YELLOW -- Core opportunity thesis is supported by YC profile and competitor activity.
Sources
- [Y Combinator, June 2025] Magnetic (Y Combinator S25) | https://www.ycombinator.com/companies/magnetic
- [promptloop.com, 2026] What Does Magnetic Do? - Company Overview | Directory | https://www.promptloop.com/directory/what-does-magnetictax-com-do
- [Crunchbase, 2026] Magnetic - Crunchbase Company Profile & Funding | https://www.crunchbase.com/organization/magnetic-4d00
- [Magnetic, 2026] Magnetic - AI Tax Preparation | https://www.magnetictax.com/about
- [Grand View Research, 2024] Tax Management Software Market Size, Share & Trends Analysis Report | https://www.grandviewresearch.com/industry-analysis/tax-management-software-market
- [AICPA, 2023] 2023 Trends Report | https://www.aicpa.org/professional-insights/download/2023-trends-report
Articles about Magnetic
- Magnetic's AI Aims to Wire a 90% Accuracy Rate Into the CPA's Tax Software — The YC S25 startup is automating data entry from handwritten notes to K-1s into legacy platforms like UltraTax and Drake.