What the IRS's New AI Guidance Means for Your Tax Practice

The OPR has provided additional context surrounding Circular 230's standards for AI use in tax. For the most part, the guidance is common sense: Don't blindly trust AI (trust but verify, as is true with any information in a high stakes professional environment), and don't upload sensitive client data to unsecured or public AI platforms. The consequences for not being familiar with OPR Alert 2026-19 can be severe, so it's important to understand exactly what is required of tax pros as AI continues to play an increasingly important role in the world of tax and beyond.

Due diligence and competence (§§ 10.22, 10.35).

Practitioners cannot rely solely on AI output and must review AI-generated work for accuracy before it is presented to a client or the IRS. As a practitioner, you are responsible for understanding the technology at use. Competence now includes understanding the LLM, how it uses data and surfaces results, along with its risks and limitations.

Written advice (§ 10.37).

AI-generated projections, figures, and citations cannot be taken at face value and must be independently verified. The OPR states that where an AI system's underlying logic is not clearly demonstrated, relying on its output may itself constitute unreasonable reliance. It is no surprise that AI frequently hallucinates numbers and presents them confidently. So be sure to review, challenge items of concern, and exercise scrutiny anytime AI is at use.

Confidentiality (§§ 6713, 7216).

Uploading sensitive client data to unsecured or public AI platforms presents significant risk, and firms are instructed to handle client data only through secure, enterprise-approved systems with confidentiality and security measures built in. Uploading a client's tax return to ChatGPT could result in civil and criminal penalties under IRC § 6713 and IRC § 7216(a).

In summary,

It is now of more importance than ever to carefully evaluate and select the right tools for your practice. Your tax planning tool should be:

1. Accurate
2. Transparent on how it got its results
3. Keep you & your clients' data secure

Tax Alpha was built to make these standards effortless for the tax planner, so that you can stop worrying about whether your tax planning software is accurate and secure, and spend more time doing what you do best: advising.