Artificial intelligence adoption among tax preparers and accounting firms has accelerated significantly, yet regulatory clarity on disclosure requirements has not kept pace with the technology’s expansion. The IRS released its first AI-specific guidance for tax practitioners in June, establishing that professionals must review and verify AI-generated work and ensure billing reflects efficiency gains. However, the guidance did not explicitly address whether clients must be informed when generative AI is used to prepare their tax returns.
Current privacy protections under Section 7216 of the Internal Revenue Code generally prohibit tax preparers from sharing or using taxpayer information beyond return preparation without written disclosure and client consent. Notably, the last formal IRS guidance on this statute dates to 2013, creating ambiguity about how these rules apply to modern AI tools. While exceptions have traditionally covered tax software, experts debate whether AI systems merit similar treatment or warrant distinct disclosure requirements.
Survey data demonstrates rapid AI adoption among tax professionals. A June survey of over 1,000 tax professionals found 60% use AI for tax research weekly, up from 33% the previous year. Additionally, 44% reported using AI for advisory projects, 40% for tax planning, and 36% for document analysis. An earlier 2024 survey indicated approximately 25% of respondents used public generative AI tools, with only 9% employing proprietary tax-specific AI technology.
Industry leaders and practitioners have called for additional regulatory guidance to address the distinction between different types of AI systems and their appropriate use in tax preparation. The American Institute of Certified Public Accountants requested clarification from the IRS regarding technology use in tax practice. Some experts recommend that practitioners obtain signed disclosures from clients when AI is involved in return preparation, given the uncertain regulatory environment. Violations of Section 7216 carry penalties up to $1,000 in fines or one year of imprisonment.
Consumers are advised to ask their tax preparers directly about AI use in their returns and to request specific explanations of safeguards protecting personal information. Industry representatives emphasize that trust remains fundamental to the profession, and practitioners bear full responsibility for AI-generated work regardless of disclosure status.
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