Financial Tools

Artificial Intelligence (AI) is rapidly reshaping the tax profession. From conducting research and analyzing nexus to organizing data, drafting memorandums, and identifying planning opportunities, AI has become an increasingly valuable tool for tax professionals and corporate tax departments alike.

However, while AI has the potential to improve efficiency and streamline routine tasks, it does not replace the professional judgment, due diligence, and technical expertise required to provide sound tax advice.

Recent guidance issued by the IRS Office of Professional Responsibility (OPR) reinforces this point. The OPR reminds practitioners that existing ethical and professional standards—including competence, due diligence, confidentiality, and firm oversight under Circular 230—continue to apply when AI is incorporated into the tax workflow. Simply put, practitioners remain responsible for the work product delivered to their clients, regardless of whether AI assisted in its preparation.

One of the most significant reminders from the guidance concerns written tax advice. Tax opinions and written recommendations must be supported by reasonable factual assumptions and applicable legal authority. AI-generated analyses, projections, or legal conclusions should never be accepted at face value. When the reasoning behind an AI-generated response cannot be verified, tax professionals must independently confirm the facts, research the applicable authorities, and validate the conclusions before relying on the information. AI should be viewed as an effective research assistant and drafting tool—not as the final authority for tax advice.

These principles become even more important in State and Local Tax (SALT), where each jurisdiction maintains its own statutes, regulations, administrative guidance, and judicial precedent. Unlike federal tax, there is no single set of rules. A conclusion that is accurate in one state may be entirely incorrect in another, making experienced state tax analysis indispensable.