As artificial intelligence becomes more common in tax preparation, the IRS is developing policies for its own use of the technology while continuing to emphasize taxpayer data protection and accurate tax reporting.
The IRS’s use of AI does not automatically authorize tax return preparers to use it in the same manner. Tax return preparers must independently ensure that their use of AI complies with applicable professional requirements.
How Is the IRS Using Artificial Intelligence?
The IRS uses artificial intelligence and related technologies to support tax administration, improve operations, and identify potential compliance issues.
AI can help government agencies analyze large amounts of information, identify patterns, and support decision-making. However, these capabilities also introduce risks involving data privacy, accuracy, and accountability.
The IRS addresses these concerns in Internal Revenue Manual (IRM) 10.24.1, IRS Policy for Artificial Intelligence (AI) Governance, revised August 10, 2026.
The policy establishes requirements for how the agency develops, purchases, uses, and monitors AI systems. It emphasizes responsible AI use, risk management, privacy protections, and oversight.
The IRS also maintains policies governing generative AI, including restrictions on which AI tools agency personnel may use.
Important: These internal IRS policies apply to IRS personnel and covered contractors and vendors. They are not a general set of AI regulations for independent tax return preparers.
What Are the IRS Guidelines for AI in Tax Preparation?
Tax professionals can use AI to assist with certain tasks, but using AI does not eliminate existing legal, ethical, or security obligations.
The most relevant requirements involve three areas: protecting taxpayer information, exercising due diligence, and maintaining accurate tax records.
1. Protecting Taxpayer Data
Tax return preparers routinely handle sensitive information, including Social Security Numbers, financial records, and income documents.
Using AI tools to process this information can create additional security risks, particularly when information is transmitted to third-party platforms.
IRS Publication 4557, Safeguarding Taxpayer Data: A Guide for Your Business, explains the security responsibilities of tax professionals.
Federal data security requirements generally call for appropriate safeguards to protect taxpayer information. Tax professionals covered by the Federal Trade Commission (FTC) Safeguards Rule must maintain a written information security plan (WISP).
Before using an AI tool, tax professionals should evaluate:
- Whether the tool stores or retains taxpayer information
- Whether uploaded information is used to train AI models
- What security measures protect sensitive data
- Whether the provider of the AI tool shares information with third parties
- Whether the tool’s use complies with applicable taxpayer disclosure and consent requirements
Tax professionals should avoid entering identifiable taxpayer information into any AI tools that are open to the public and not vetted for reasonable safeguards for taxpayer data.
A secure AI workflow begins with understanding how information is collected, processed, stored, and shared.
2. Verifying AI-Generated Tax Information
Generative AI can produce convincing answers that contain incorrect or outdated information.
This creates risks when using AI to research tax law, identify deductions, or interpret filing requirements.
The Taxpayer Advocate Service has cautioned that AI chatbots may provide inaccurate answers to complex tax questions.
For example, an AI tool might:
- Reference a tax provision that no longer applies
- Use outdated income thresholds or deduction limits
- Misinterpret eligibility requirements for a tax credit
- Provide incorrect filing deadlines
- Generate citations that do not support its conclusions
Tax professionals should verify AI-generated tax information against authoritative sources, including the Internal Revenue Code, Treasury regulations, IRS publications, and official instructions.
AI can support research, but it should not replace professional judgment.
3. Maintaining Professional Responsibility
Tax professionals must continue to meet applicable professional standards when incorporating AI into their work.
Treasury Department Circular No. 230 establishes rules governing practice before the IRS.
Section 10.22 addresses diligence concerning accuracy. Practitioners must exercise due diligence when preparing, approving, and filing tax-related documents and when making representations to the Treasury Department.
Section 10.34 addresses standards relating to tax returns, documents, affidavits, and other papers.
These responsibilities remain relevant when a practitioner uses AI to assist with research or document preparation.
AI-generated content should be reviewed before it influences a tax position, return, or communication with the IRS.
How Can Tax Professionals Use AI Responsibly?
AI can provide practical support for tax preparation businesses when firms establish clear procedures for its use.
Some potential applications include:
Tax Research Assistance
AI can help summarize tax topics, identify relevant terminology, and organize research questions. Preparers should verify legal conclusions against current primary sources.
Administrative Tasks
AI can assist with drafting appointment reminders, creating internal checklists, and preparing general communications that do not contain confidential taxpayer information.
Document Organization
Appropriately secured tools may help categorize documents and extract information from financial records. Preparers must verify extracted data before using it in a tax return.
Taxpayer Education
AI can help draft plain-language explanations of tax concepts. A qualified reviewer should check the content for accuracy before sharing it with taxpayers.
The goal is to use AI as an assistant while maintaining human review and control over tax decisions.
Five Steps for Establishing an AI Policy in Your Tax Practice
Tax firms considering AI should establish written procedures before incorporating these tools into routine workflows.
Step 1: Evaluate AI Tools Before Adoption
Review each tool’s privacy policy, security features, data retention practices, and contractual terms.
Determine whether the provider can access, retain, or use taxpayer information for purposes unrelated to the service.
Step 2: Update Your Data Security Plan
Review the firm’s WISP to determine whether existing safeguards address AI-related risks.
Include procedures for approved tools, employee access, sensitive data, and third-party service providers.
Step 3: Establish Clear Rules for AI Use
Identify which tasks employees may complete with AI and which activities require additional approval.
For example, a firm may permit AI assistance with general research while restricting the upload of identifiable taxpayer documents.
Step 4: Require Human Review
Establish procedures for checking AI-generated calculations, citations, tax explanations, and document summaries.
Assign responsibility for reviewing work before it affects a tax return or tax payer recommendation.
Step 5: Train Employees
Educate employees about AI limitations, data security, confidentiality, and the firm’s approved workflows.
Review these procedures periodically as technology, regulations, and IRS guidance change.
Is the IRS Requiring Tax Preparers to Use AI?
No general IRS requirement mandates that tax return preparers use artificial intelligence.
AI adoption remains a business decision, subject to existing laws and professional obligations.
Likewise, the IRS’s internal AI governance policies should not be interpreted as requiring tax firms to adopt specific AI products.
Tax professionals should distinguish between rules governing the IRS’s internal operations and requirements governing private tax practices.
The Future of AI and Tax Compliance
Artificial intelligence is likely to remain an important part of tax administration and tax preparation.
The IRS’s 2026 AI governance policy reflects the agency’s efforts to establish oversight and safeguards for its own AI systems. The Electronic Tax Administration Advisory Committee’s 2026 annual report also identifies AI and human-centered design among its areas of focus.
For tax professionals, the central considerations remain accuracy, confidentiality, and accountability.
Firms that establish clear AI policies can explore the technology’s benefits while addressing potential risks.
Opportunities in AI
AI offers opportunities to improve tax preparation workflows, but it does not replace the responsibilities of a qualified tax return preparer.
IRS guidance and existing federal requirements reinforce the importance of protecting taxpayer information, exercising due diligence, and verifying tax-related information.
Before adopting AI, tax professionals should evaluate their tools, establish internal safeguards, and maintain human oversight.
The most effective approach is to treat AI as a resource that supports professional expertise—not a substitute for it.
For more information and Drake and its AI capabilities, please visit Drake Intelligence.
Disclaimer: This article is for informational purposes only and not legal or financial advice.
Primary Source
| Source | Document and Section |
| IRS Office of Professional Responsibility | Alert, Issue 2026-19, Introductory Guidelines for Responsible AI Use in Federal Tax Practice |
| IRS Internal Revenue Manual | IRM 10.24.1, IRS Policy for Artificial Intelligence Governance, including section 10.24.1.7 |
| IRS Publication 4557 | Safeguarding Taxpayer Data, security plans and taxpayer information safeguards |
| Treasury Department Circular No. 230 | 31 CFR Part 10, sections 10.22 and 10.34, due diligence and tax return standards |
| IRS Internal Revenue Bulletin 2008-5 | Treasury Regulations sections 301.7216-1 through 301.7216-3, disclosure and use of tax return information |
