AICPA Requests IRS Guidance on AI Privacy Rules

Tax accounting firms are integrating artificial intelligence into research, planning, and document analysis, leading to concerns that Internal Revenue Service (IRS) privacy rules have become obsolete. The American Institute of Certified Public Accountants (AICPA) has requested additional guidance from the IRS to clarify how Section 7216 of the Internal Revenue Code applies to generative AI, noting that the last formal guidance on the matter was issued in 2013.

While the IRS released AI-related guidance in June requiring practitioners to verify AI-generated work and adjust billing for efficiencies, the agency did not specify if firms must disclose the use of generative AI to clients. Under Section 7216, tax preparers are generally prohibited from sharing taxpayer information without a signed disclosure, although exceptions have historically applied to tax software.

Experts emphasize that practitioners remain accountable for the accuracy of client returns despite the use of AI platforms. To mitigate legal risks, the AICPA recommends that practitioners obtain signed disclosures from clients. Knowingly violating these privacy statutes can result in fines up to $1,000 and up to one year in jail.