Tax preparation firms are rapidly integrating artificial intelligence into their operations, with recent surveys showing significant adoption rates across various functions. According to a June survey from Blue J and CPA.com covering more than 1,000 tax professionals, 60% use AI for tax research at least weekly, compared to 33% in 2025. The survey also found that 44% employ AI for advisory projects, 40% for tax planning, 39% for compliance research, 36% for document analysis, and 35% for drafting purposes.
The IRS released its initial guidance on AI use by tax practitioners in June, establishing that professionals must review and verify AI-generated work and that billing should reflect any efficiencies gained through AI adoption. However, the guidance did not explicitly address whether practitioners are required to disclose their use of generative AI to clients. Existing law under Section 7216 of the Internal Revenue Code generally prohibits tax preparers from sharing taxpayer information for purposes beyond return preparation without obtaining signed disclosure and client permission. Yet ambiguity exists around whether AI usage constitutes a disclosure-triggering event, particularly since historical exceptions have applied to tax software.
Experts and industry representatives are actively seeking clarification on this matter. Henry Grzes, lead manager for tax practice and ethics with the American Institute of Certified Public Accountants, noted that the last formal IRS guidance on Section 7216 dates to 2013, predating the modern AI era. The AICPA requested additional guidance on technology and AI use in tax preparation as part of its 2026 response to the IRS’ annual request for prioritized tax issues.
There is disagreement among professionals regarding the appropriate disclosure standard. Some argue that since financial advisors require client disclosure under existing rules, similar disclosure should apply to AI tools handling client data. Others contend that closed AI platforms used solely for specific client returns function similarly to standard tax software and should not require additional disclosure. Given the current regulatory uncertainty, the AICPA recommends that tax practitioners err on the side of caution and obtain signed disclosures when using AI to prepare returns.
Violating Section 7216 can result in penalties up to $1,000 in fines or one year of jail time, or both. For individual returns, practitioners must provide 7216 disclosures as a separate document, while non-individual returns can include such disclosures in engagement letters. Consumers are advised to ask their tax preparers about AI involvement and to carefully evaluate responses regarding the safeguards protecting their personal information.
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