Tax firms and accountants are increasingly adopting artificial intelligence in their workflows, but experts warn that IRS privacy regulations have not kept pace with this technological shift. The IRS issued its first AI-related guidance in June, which requires tax practitioners to verify AI-generated work and adjust billing to reflect efficiencies gained through AI.
However, it remains unclear whether tax preparers must disclose the use of generative AI to clients. Current laws dictate when disclosures are necessary, but ambiguities exist, particularly regarding AI's role compared to traditional tax software.
A survey by the Thomson Reuters Institute revealed that 25% of tax professionals use public-facing generative AI tools, while 60% utilize AI for tax research weekly. Experts, including Henry Grzes from the AICPA, emphasize the need for updated IRS guidance on Section 7216, which governs taxpayer privacy.
They recommend that tax practitioners obtain signed disclosures from clients when using AI to prepare returns to avoid potential legal repercussions. As AI becomes more prevalent, consumers are advised to inquire about the safeguards their tax preparers have in place to protect their personal information