The IRS Office of Professional Responsibility issued guidance on June 24, 2026 confirming that Circular 230 duties do not change when a tax practice uses AI: due diligence, competence, and confidentiality apply to AI-assisted work exactly as they apply to manual work. AI can support a practitioner’s judgment, but it can’t replace it. The practical response is governance: name your approved tools, set data boundaries, and write both into your WISP.
Key takeaways
The IRS Office of Professional Responsibility issued AI guidance on June 24, 2026.
Circular 230 duties are unchanged: due diligence (section 10.22), competence (section 10.35), and confidentiality all reach AI-assisted work.
AI must augment practitioner judgment, never replace it.
The AI clause in a WISP names approved tools, data boundaries, client-data rules, and review requirements.
NATP’s AI-governance curriculum, co-built with Verito, reaches 23,000+ members.
Table of Contents
What does the IRS Circular 230 AI guidance actually say?
On June 24, 2026, the IRS Office of Professional Responsibility confirmed that AI does not change a practitioner’s obligations under Circular 230. Due diligence, competence, and confidentiality stand exactly as written, and AI may support professional judgment but never substitute for it. Responsibility for every position and every return stays with the practitioner who signs.
That framing is relief, not burden. A firm using a research assistant to draft memos, a chatbot to summarize source documents, or an AI feature inside its tax software doesn’t need a new compliance program. It needs to apply the program it already has to a new category of tool. The AICPA’s introductory guidelines for responsible AI use in federal tax practice take the same line: start from existing professional standards, then document how the firm actually uses the tools.
Which Circular 230 duties does AI use touch?
Three duties carry the weight: due diligence under section 10.22, competence under section 10.35, and confidentiality of client information. Each one already governed how a firm handles research, software, and staff work. AI now lands inside all three, so a firm using AI without written rules is carrying professional risk it hasn’t documented.
Circular 230 duty
Where it lives
What it requires when AI is in the workflow
Due diligence
Section 10.22
Verify AI output before it reaches a return, a filing, or a client. Treat a model’s answer like a first-year associate’s draft: reviewed, checked against sources, corrected.
Competence
Section 10.35
Understand what each tool does, what its limits are, and where it fails. Relying on a tool you can’t explain is the same gap as practicing in an area you don’t know.
Confidentiality
The client-data protections practitioners already operate under, including the safeguards in IRS Publication 4557
Client data goes only into tools the firm has approved and controls. A public chatbot that keeps or trains on prompts is a disclosure question, not a productivity shortcut.
The due-diligence duty under Circular 230 is where most firms will feel the guidance first. Section 10.22 requires practitioners to exercise due diligence in preparing returns and in determining the correctness of representations they make. An AI drafting tool doesn’t lower that bar, and a hallucinated citation or a wrong figure that reaches a client is a section 10.22 problem no matter which tool produced it.
Competence under section 10.35 works the same way. A practitioner is expected to know enough about a tool’s behavior to use it responsibly, the way they’re expected to know their tax software’s carryover behavior before trusting it. And confidentiality is the quiet one: a staff member pasting a client’s K-1 into a free chatbot has made a disclosure decision on the firm’s behalf, whether or not anyone wrote it down.
Does your firm need a separate AI policy?
For most firms, no. The natural home for AI rules is the written information security plan the firm already maintains. IRS Publication 4557 expects every paid preparer to keep a WISP, and the FTC Safeguards Rule is where the written-plan duty is codified. An AI clause extends the plan that exists rather than starting a second one.
A standalone AI policy is fine if the firm wants one, and larger practices with an IT director sometimes go that way. But a policy that lives outside the WISP tends to drift: the WISP gets its annual review, and the side policy quietly doesn’t. IRS Publication 4557 already frames the WISP as a living document that changes when the firm’s software, staff, or workflow changes. Adopting an AI tool is exactly that kind of change.
The ordering matters for small firms. Start with the IRS frame, because it’s the vocabulary every preparer already knows: Pub 4557 and the WISP. The FTC Safeguards Rule sits underneath as the legal source of the written-plan duty, and one clause in one document serves both conversations. One plan, reviewed annually, updated when the tools change.
What should the AI clause in your WISP cover?
Four things: an approved-tools list, data boundaries for each tool, client-data rules staff follow day to day, and review requirements before AI output reaches a client or a return. A clause with those four parts documents how the firm governs AI. It does not, by itself, make any particular AI use compliant.
Approved tools. Name the AI products the firm permits, specifically. “ChatGPT” and “the AI features inside our tax software” are different tools with different data paths. If a tool isn’t on the list, it isn’t approved, and that sentence belongs in the clause too.
Data boundaries. For each approved tool, state what may go into it and what may not. A workable split: public reference questions can go anywhere, while anything containing client identifiers stays inside tools the firm controls and has configured.
Client-data rules. Spell out the handling rules staff follow: no client names, Social Security numbers, or return data in unapproved tools, and approved tools set so prompts aren’t retained or used for training wherever the vendor offers that setting.
Review requirements. State who reviews AI-assisted work and when. Section 10.22 is the anchor: AI output gets the same review a junior preparer’s draft gets before it reaches a signature.
Write the WISP clause as a description of current practice, not an aspiration. If the firm hasn’t decided which tools it permits, that decision comes first and the clause records it. And keep the claim honest in both directions: the clause documents governance, while the duties themselves are met, or missed, in the work. The review that catches a bad citation and the boundary that keeps a 1040 out of a public chatbot are what the IRS guidance actually asks for.
How are tax professionals learning AI governance?
Largely through their professional associations. In May 2026 the National Association of Tax Professionals launched an AI-governance and cybersecurity curriculum for its 23,000+ members, developed in partnership with Verito. The curriculum treats AI governance and client-data security as one discipline, which is the same shape the IRS guidance took a month later.
CPA Practice Advisor covered the launch on May 20, 2026: NATP and Verito built the program to give tax professionals a working framework for adopting AI while keeping client data protected, delivered through NATP’s member education channels.
Verito co-built that curriculum: the four-part clause structure described in this article is the same approach the curriculum teaches. Firms that want the longer version, with instruction and examples, can get it through NATP member education. The point of both is identical, though. Governance is a set of written, teachable habits, not a technology purchase.
Who controls the AI tools your firm runs?
Your firm does, and infrastructure decides how practical that control is. On a dedicated private server, the firm chooses which applications are installed, including whichever AI assistant it decides to adopt, so the approved-tools list in the WISP matches what can actually run. Governance written on paper needs an environment where the same choices hold.
This is where the June guidance meets a buying decision most firms made years ago, before AI was part of the question. On shared infrastructure, the vendor decides what’s installed, what’s bundled, and what ships next quarter. Some hosts now bundle their own AI assistant into the platform, which means the tool arrives before the firm’s policy does.
A dedicated private server inverts that. Verito deliberately doesn’t bundle an AI product: the firm picks its AI tools the same way it picks its tax software, and only what the firm approves gets installed. Every Verito hosting plan (VeritSpace and VeritComplete) runs on a dedicated private server with 256-bit encryption and MFA, SOC 2 Type II and ISO 27001 certified, so the environment holding client data is one the firm actually governs.
AI bundled by your vendor
AI your firm chooses on a dedicated private server
Who picks the tool
The vendor, for every customer at once
The firm, per its own WISP clause
Who sets data boundaries
The vendor’s defaults
The firm’s policy, set per tool
When guidance changes
Wait for the vendor’s update cycle
The firm updates its own approved list
What the WISP describes
A tool the firm didn’t select
What’s actually installed
Best fit
Firms comfortable adopting the vendor’s choice
Firms that want the WISP and the server telling the same story
Customers describe the same operating model with every other application on the server, and AI tools join that routine rather than inventing a new one.
“I love how easy the setup process was; they set up the remote desktop, added all my past years’ Drake software to their platform, and every year when I need to add another platform, I simply give them my new serial number.”
LAURA F., Owner, Foos’ Financial Services LLC · G2, Oct 2025
How does Verito fit into an AI governance plan?
VeritShield WISP is a $999-per-year subscription: a custom written plan built around your firm’s size, software, and workflow, delivered in 5 business days, with unlimited revisions all year. Adding an AI clause is a revision, not a new purchase. VeritComplete, from $129 per user per month, includes the full WISP on every tier.
The subscription model is what makes it fit this topic. AI stacks change mid-year: a firm adopts a research tool in June, drops it in September, and turns on the assistant inside its tax software at renewal. Under VeritShield’s unlimited-revisions terms, each change becomes a plan update at no extra cost, so the WISP keeps describing the firm as it actually operates. The plan is custom-built after a 30-minute scoping call, is designed to support IRS Pub 4557 and FTC Safeguards requirements, and doesn’t require being a Verito hosting customer.
For firms that want the environment and the paperwork handled by the same people, VeritComplete pairs a dedicated private server with managed IT at $129, $199, or $249 per user per month, with the full $999-per-year WISP included on every tier and a real person answering in under 60 seconds. It’s the same dedicated-server setup 1,000+ tax and accounting firms already use, rated 4.9/5 across 170+ G2 reviews.
“Verito is reliable, secure, and easy to use. Their support team is fast and professional, and the cloud runs smoothly with great uptime.”
STEPAN M., Owner, Toliman Consulting Corp · G2, Oct 2025
The June 24 guidance asks less than the headlines implied. The duties are the ones your firm has practiced under since before AI arrived; what’s new is writing down how the firm applies them to a new set of tools. Name the tools, draw the data boundaries, keep the review habit, and put it in the WISP. If the IRS, a client, or your insurance carrier asks how the firm governs AI, you have an answer.
Camren Majors is co-founder and Chief Revenue Officer of Verito Technologies, a cloud hosting and managed IT company built exclusively for tax and accounting firms. He is the co-author of Beyond Best Practices: Modernizing the Successful Accounting Firm (2026). His work has been featured in NATP TAXPRO Magazine and he has presented for NATP, NAEA, and NSA.
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