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ritten by: Sarah Peck
Artificial intelligence (AI) has become part of everyday life, and the tax profession is no exception. Tax attorneys, certified public accountants (CPAs), and enrolled agents are increasingly using generative AI tools to summarize tax law, draft client communications, and assist with research. As these tools become more common, an important legal question has emerged: How should existing ethical rules apply when tax professionals rely on AI?
On June 24, 2026, the Internal Revenue Service’s (IRS) Office of Professional Responsibility (OPR) addressed that question by issuing its first guidance on the responsible use of generative AI in federal tax practice. Rather than creating an entirely new set of regulations, the IRS concluded that the existing rules governing tax professionals already provide the framework for using AI responsibly. The guidance signals that while technology may change how tax professionals work, it does not change their legal and ethical obligations.
What Is Circular 230?
To understand the IRS’s guidance, it helps to understand Circular 230. Although the name sounds technical, Circular 230 is simply a set of Treasury regulations that establish the standards of conduct for professionals who practice before the IRS. Attorneys, CPAs, enrolled agents, and other authorized representatives must comply with these rules when advising clients, preparing submissions, or communicating with the IRS.
Among other requirements, Circular 230 requires practitioners to exercise competence, perform due diligence, protect confidential taxpayer information, and avoid charging unreasonable fees. Violations can result in disciplinary action ranging from public reprimands to suspension or disbarment from practice before the IRS.
These obligations existed long before artificial intelligence became widely available. The recent guidance explains how they apply when AI becomes part of a practitioner’s workflow.
Why Did the IRS Issue New Guidance?
Generative AI can produce polished writing, summarize complex legal authorities, and answer technical tax questions within seconds. These capabilities offer obvious benefits, particularly for routine drafting and preliminary research. At the same time, AI systems are capable of producing incorrect legal citations, relying on outdated authority, or generating convincing but inaccurate answers.
The risks are no longer theoretical. In 2023, two attorneys representing a plaintiff in Mata v. Avianca, Inc. submitted a federal court brief containing multiple case citations that were entirely fabricated by an AI chatbot. Because the attorneys failed to independently verify the authorities before filing the brief, the court imposed sanctions and emphasized that lawyers, not artificial intelligence, remain responsible for the accuracy of their filings.
Although that case did not involve tax law, the lesson applies equally to tax practice. A practitioner who relies on AI to research Internal Revenue Code provisions, Treasury regulations, or IRS guidance without verifying the results could provide inaccurate advice to a client or submit erroneous information to the IRS. The consequences may include professional discipline, malpractice exposure, or penalties for the client.
The IRS recognized that these risks raise professional responsibility concerns. If an AI program prepares a memorandum containing incorrect legal authority, who is responsible for the mistake? According to the Office of Professional Responsibility, the answer is straightforward: the practitioner remains responsible.
The guidance emphasizes that AI is a tool, not a substitute for professional judgment. Tax professionals may use AI to improve efficiency, but they must independently verify legal authorities, review factual assertions, and ensure that all advice complies with applicable law before it reaches a client or the IRS.
Applying Old Rules to New Technology
Perhaps the most interesting aspect of the guidance is what it does not do. The IRS did not create new AI-specific ethical duties. Instead, it applied long-standing principles to modern technology.
This approach reflects a broader legal question that extends beyond tax practice. Should regulators create entirely new rules every time technology changes, or should existing legal standards evolve to address new circumstances?
The IRS appears to favor the latter approach. Circular 230 already requires competence and due diligence. The agency simply interprets those duties to include understanding the capabilities and limitations of AI. In other words, practitioners are expected to understand enough about the technology to recognize when additional human review is necessary.
This approach offers flexibility because the guidance can adapt as AI systems improve. At the same time, it places greater responsibility on practitioners to determine when AI-generated work requires additional scrutiny.
What Comes Next?
The IRS’s guidance is unlikely to be the final word on AI in tax practice. As AI tools become more sophisticated, questions will continue to emerge regarding confidentiality, cybersecurity, billing practices, and malpractice liability.
One area likely to receive additional attention is fee arrangements. If AI dramatically reduces the time required to complete certain tasks, practitioners may need to reconsider how they bill clients while remaining consistent with Circular 230’s prohibition on unreasonable fees. Similarly, firms will need policies governing the use of confidential taxpayer information in AI systems, particularly when using publicly available platforms.
The guidance also suggests that technological competence may become an increasingly important part of professional competence. Future disciplinary cases may help define where the line exists between reasonable reliance on AI and an unacceptable failure to exercise independent judgment.
Conclusion
The IRS’s new guidance does not prohibit the use of AI in tax practice. Instead, it reinforces a familiar principle: technology may assist professionals, but it does not replace their legal responsibilities.
By applying existing ethical standards rather than creating entirely new rules, the IRS has taken a measured approach that balances innovation with accountability. Whether this framework remains sufficient as AI continues to evolve will likely become one of the defining questions for the future of tax practice. For now, the message to tax professionals is clear: AI may help prepare the work, but practitioners remain responsible for its accuracy, integrity, and compliance with the law.
Sources:
Mata v. Avianca, Inc., 678 F. Supp. 3d 443 (S.D.N.Y. 2023).
Office of Pro. Resp., Internal Revenue Serv., Office of Professional Responsibility & Circular 230 (May 28, 2026), https://www.irs.gov/tax-professionals/office-of-professional-responsibility-and-circular-230.
Office of Pro. Resp., U.S. Dep’t of the Treasury, Introductory Guidelines for Responsible AI Use in Federal Tax Practice (June 24, 2026), https://content.govdelivery.com/accounts/USIRS/bulletins/41d6e70.
Thomson Reuters, IRS Office of Professional Responsibility Issues Guidelines on AI Use in Tax Practice (June 25, 2026), https://tax.thomsonreuters.com/news/irs-office-of-professional-responsibility-issues-guidelines-on-ai-use-in-tax-practice/.