How Should Tax Professionals Disclose AI Use to Clients?

If you’re using AI in your tax or accounting practice, should your clients know?

According to the IRS guidance on responsible AI use in federal tax practice, transparency matters. But the guidance doesn’t provide practitioners with a specific script or disclosure process to follow.

In this final episode of my three-part conversation with Les Brown, founder and CEO of The Lab Tax Business Solutions, we talk about what that disclosure process might look like in practice.

Les explains why he wouldn’t simply bury an AI disclosure inside an engagement letter, why he recommends discussing AI use before the work begins, and why written client acknowledgment may be a practical way to document that conversation.

We also bring the entire series together: creating an AI plan, protecting client information, verifying AI-generated work, adjusting your pricing model, and making sure professional judgment remains at the center of the client relationship.

AI Disclosure Should Be More Than Fine Print

The IRS guidance addresses transparency when practitioners use AI, but it doesn’t spell out exactly how that disclosure should happen.

That’s where Les believes firms need to develop their own practical process.

His first recommendation is not to simply add a sentence somewhere deep inside an engagement letter and assume the issue has been handled.

If AI is going to play a meaningful role in the work you’re doing for a client, Les recommends discussing that use before the work begins and making sure the client understands what you’re doing.

He also suggests using a separate disclosure and obtaining written acknowledgment from the client.

The important distinction is that this is Les’s recommended approach for creating a clear process. The IRS guidance itself does not prescribe a particular disclosure form.

Don’t Be Too Vague or Too Specific

There’s another practical challenge when explaining AI use to clients.

If the disclosure is too vague, the client may not really understand how AI is being used.

But if you’re too specific and identify one particular AI platform, model, or process, you may create another problem. Technology changes quickly. A platform could become unavailable, your firm could change tools, or a different solution could become more appropriate.

Les recommends providing enough information for the client to understand how AI fits into the work without making the disclosure so narrow that every operational change requires starting the process over again.

Disclosure Doesn’t Replace Professional Judgment

One theme has run through all three episodes in this series: AI doesn’t eliminate your professional responsibility.

During our conversation, I shared an example of an expert witness who entered essentially the same question into several large language models and received different answers.

Which answer was right?

That’s exactly why the professional still matters.

AI-generated information has to be reviewed. Facts, calculations, sources, citations, and conclusions need to be checked before they’re delivered to a client or used in tax work.

As Les points out, clients aren’t simply paying for the time it takes you to produce a document. They’re paying for your judgment, training, experience, and expertise.

AI Disclosure and Value Pricing Fit Together

This also connects directly to the pricing discussion from the previous episode.

AI may allow you to complete some tasks much more efficiently. That creates a challenge when your pricing is based primarily on the number of hours required to perform the work.

If you explain to clients that you’re using technology to become more efficient, it creates a natural opportunity to also explain how you’re changing the way you price your services.

The focus can move away from how many hours were spent and toward the value of the service, the professional review involved, and the result you’re providing.

I discussed this broader shift in How AI Is Changing Billable Hours for Accounting Firms.

Your Firm Needs an AI Process, Not Just an AI Tool

As we wrap up the three-part series, Les emphasizes that responsible AI use starts with having an actual plan.

Your firm should know how AI will be used, what information can and cannot be entered into the tools, how AI-generated work will be reviewed, and how clients will be informed.

That process also needs to be understood by your team.

Simply giving employees access to an AI tool isn’t an AI strategy. You need procedures that help protect client data, establish how work is verified, and create consistency across the firm.

Advisory Services Become Even More Important

There is also a larger business issue behind this conversation.

As AI and automation make traditional compliance work more efficient, Les believes consulting and advisory services are likely to become increasingly important revenue sources for accounting firms.

That’s where professional judgment becomes especially valuable.

Producing a financial statement is one thing. Helping a business owner understand what the numbers mean, recognize trends, identify potential problems, and decide what to do next is something very different.

Financially Fit Business helps financial professionals turn client financial statements into clear visual trends so you can have those higher-value conversations without spending hours manually creating the analysis.

Responsible AI Use Comes Back to Trust

The technology will continue changing. The specific AI tools your firm uses today may not be the ones you use a year from now.

But your responsibilities to your clients don’t disappear.

Create a process. Protect their information. Review the work. Be transparent about how you’re using AI. Price your services in a way that reflects the value you’re providing.

And most importantly, remember that AI is a tool. Your judgment is still what the client is relying on.

Common Questions About AI Disclosure in Tax Practice

Do tax professionals need to disclose their use of AI to clients?

The IRS guidance emphasizes transparency around AI activities in federal tax practice. In this episode, Les Brown recommends discussing meaningful AI use with clients before the work is performed rather than treating disclosure as an afterthought.

Should AI disclosure be included in the engagement letter?

Les recommends going further than simply burying AI language inside a standard engagement letter. His preferred approach is a separate disclosure that clearly explains the firm’s use of AI and provides documentation that the client has acknowledged it.

Does the IRS require a separate signed AI disclosure form?

The guidance discussed in this episode does not prescribe a specific disclosure form. A separate written acknowledgment is Les Brown’s recommended approach for creating a clear, documented process with clients.

Can tax professionals rely on information produced by AI?

No. AI-generated work still requires professional review. Facts, calculations, citations, and conclusions should be independently checked before the information is provided to a client or used in tax work.

How specific should an AI disclosure be?

The disclosure should give clients enough information to understand how AI is being used without unnecessarily tying the firm to one particular tool or model. Being too vague may not adequately inform the client, while being overly specific can create problems when technology or processes change.

Why does AI make value pricing more relevant for accounting firms?

AI can significantly reduce the time required to complete certain tasks. When pricing is based entirely on hours, increased efficiency can create pricing challenges. Value pricing allows the conversation to focus more on professional judgment, expertise, service, and results.

What should an accounting firm’s AI policy address?

A practical AI process should address how AI tools may be used, protection of client information, review and verification of AI-generated work, staff procedures, and how AI use will be communicated to clients.

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