The rise of artificial intelligence in tax preparation is both exciting and unsettling, and it’s raising questions that, frankly, no one seems fully prepared to answer. Can your tax preparer use AI without telling you? The short answer is: it’s complicated. And that complexity, in my opinion, is where the real story lies.
Let’s start with the obvious: AI is transforming industries, and tax preparation is no exception. From my perspective, what makes this particularly fascinating is how quickly the technology has been adopted. According to a 2024 Thomson Reuters Institute report, 25% of tax professionals are already using public-facing generative AI tools. That’s a staggering number, especially when you consider how conservative the accounting profession tends to be. But here’s the kicker: only 9% are using proprietary, tax-specific AI. This disparity, I believe, highlights a broader trend—professionals are eager to leverage AI, but they’re often doing so without specialized tools designed for their field.
Now, let’s talk about the elephant in the room: transparency. The IRS has issued some guidance on AI use, but it’s vague at best. For instance, tax preparers are required to review and verify AI-generated work, and billing should reflect AI-driven efficiencies. But does this mean they have to disclose AI use to clients? The IRS hasn’t said. Personally, I think this is a massive oversight. If you take a step back and think about it, tax preparation is built on trust. Clients entrust their most sensitive financial information to professionals, often without fully understanding the tools being used. Shouldn’t they know if their data is being fed into an AI system?
One thing that immediately stands out is the ambiguity around Section 7216 of the Internal Revenue Code, which governs taxpayer privacy. The last formal guidance on this was issued in 2013—a lifetime ago in tech years. Henry Grzes from the AICPA rightly points out that the tax landscape has changed dramatically since then. AI wasn’t even on the radar in 2013, yet we’re now relying on it to make judgment calls and draft returns. This raises a deeper question: Is AI just another tool, like tax software, or is it something fundamentally different?
In my opinion, it’s the latter. What many people don’t realize is that AI isn’t just automating tasks—it’s making decisions. Joshua Youngblood, an IRS enrolled agent, makes a compelling point: if you need a disclosure to share tax documents with a financial advisor, why wouldn’t you need one for an AI tool that’s essentially acting as a co-preparer? This isn’t just about semantics; it’s about accountability. If something goes wrong, who’s responsible—the tax preparer, the AI developer, or the client who didn’t know AI was involved?
A detail that I find especially interesting is the distinction between open and closed AI systems. Not all AI is created equal. Some platforms use client data to train themselves, while others operate in a closed environment. The IRS could—and should—clarify how these differences impact privacy and disclosure requirements. But until they do, tax preparers are left in a gray area, trying to do the right thing without clear rules.
For consumers, this means asking questions. Personally, I’d want to know not just whether AI is being used, but how. What guardrails are in place to protect my data? If a tax preparer brushes off the question with a vague ‘everything is safe,’ that would be a red flag for me. Trust isn’t built on reassurance—it’s built on transparency.
What this really suggests is that we’re at a crossroads. AI has the potential to revolutionize tax preparation, making it faster, more accurate, and more efficient. But without clear guidelines, we risk eroding the trust that’s essential to the profession. The IRS needs to step up and provide concrete guidance—not just for tax preparers, but for clients who deserve to know how their data is being used.
In the end, this isn’t just about AI; it’s about the future of trust in a digital age. If we get this wrong, the consequences could be far-reaching. So, let’s hope the IRS acts soon—because the last thing we need is a tax system where transparency is optional.
