IRS Office Of Professional Responsibility Issues Introductory Guidelines On Artificial Intelligence Use In Federal Tax Practice

On June 24, 2026, the IRS Office of Professional Responsibility (OPR) released 2026-19 (the OPR Guidance); its first substantive guidance on generative artificial intelligence (AI) in tax practice. The OPR Guidance notes there is no single settled definition of AI given how fast the technology changes, but describes it broadly as machines mimicking human cognitive functions, including judgment and prioritization and observes that virtually every tax firm already uses some form of it — often through research platforms such as Bloomberg Tax. The OPR Guidance provides six (6) existing Circular 230 obligations on AI use.

The OPR Guidance points to disciplinary consequences currently under review, such as courts sanctioning lawyers for fabricated AI citations or hallucinations, with penalties including substantial financial sanctions, public censure, mandatory ethics coursework, default judgments, removal from representation and referrals to state bar authorities. It also cites a 2025 government report prepared by a large accounting firm in Australia that contained invented quotes, fake source references and misattributed authorship — all apparently AI-generated — which the accounting firm resolved by partially refunding its fee.

The six Circular 230 provisions applied to AI raised in the OPR Guidance are as follows:

1. §10.22 – Due Diligence. Practitioners must thoroughly review all AI-generated content before delivering it to clients or the IRS, verifying facts, citations and calculations. AI cannot substitute for human review.
2. §10.27(a) – Practitioner Fees. Billing for manual time not actually spent, or double-billing for AI-assisted work, may constitute an unconscionable fee depending on the pattern or size of the discrepancy; as such, cost savings from AI should be passed on transparently, with AI use disclosed and reductions fairly credited to the client.
3. §10.35 – Practitioner Competence. Practitioners need to understand both the law and the AI systems’ operational mechanics, limitations and risks, including how the AI generates content and to spot bias or errors as lacking that competence risks improper advice or flawed filings.
4. §10.36 – Procedures to Ensure Compliance. Firm leadership can face discipline for willfully, recklessly, or grossly failing to establish adequate compliance procedures around AI use across the firm, requiring documented staff training, internal protocols, and vetting of third-party AI vendors.
5. §10.37 – Requirements for Written Advice. Written tax advice must rest on reasonable factual and legal assumptions with facts reasonably ascertained, meaning AI-generated projections or citations cannot be relied on without independent verification. Furthermore, “if the system’s logic is opaque, reliance may be unreasonable.” See §§ 6713 and 7216(a).
6. §10.51(a)(15) – Confidentiality. Client data may only go through secure, enterprise-approved AI systems with robust confidentiality safeguards; willful mishandling of taxpayer information via AI may trigger Circular 230 discipline.

Best practices flagged in the OPR Guidance include: (i) staying current on federal and state AI laws; (ii) establishing secure data-handling protocols; (iii) documenting AI usage and verification steps; (iv) maintaining transparency and accountability; (v) anticipating a breach or error response plan; (vi) training; (vii) vetting third-party AI vendors; (viii) ensuring that sensitive data is not uploaded to unsecured platforms; and (ix) treating all AI output as a draft requiring full factual and citation review.

While the OPR Guidance does not require abandoning AI, it does place guards and rails to formalize governance in written policies, documenting review, vetting vendors and ensuring adequate billing protocols for these purposes under the IRS’s watchful eye, which may result in a request for documentation or examination. Practitioners should remain alert in reviewing the OPR Guidance as the IRS’s position on this important topic continues to evolve.

Source: Office of Professional Responsibility, Internal Revenue Service, OPR Guidance Issue No. 2026-19, “Introductory Guidelines for Responsible AI Use in Federal Tax Practice” (June 24, 2026), https://content.govdelivery.com/accounts/USIRS/bulletins/41d6e70