I have lived through virtually every seismic shift this profession has thrown at us. But what is happening right now with artificial intelligence, and specifically generative AI? This is different. This is bigger. And the IRS just made it official.

On June 24, 2026 , the IRS Office of Professional Responsibility dropped its “Introductory Guidelines for Responsible AI Use in Federal Tax Practice”. Their first formal guidance tying AI directly to Circular 230. If you haven’t read it, stop everything. We’ll get to it. But first, let me put this whole AI moment in proper historical context because we have been here before. Sort of.

We’ve Danced This Dance Before (Kind Of)

Let me take you back. When I started in 1986, tax returns were prepared by hand, typed on IBM Selectric typewriters, and the idea of a computer spitting out a Schedule K-1 would have sounded like science fiction. Then came personal computers and tax software in the late 1980s and early 1990s (Thomson Rueters, CCH, Lacerte, ProSystem) and everyone panicked. “Will software replace CPAs?” The answer, of course, was no. It eliminated the drudgery and made us faster. We survived. We thrived.

Then came the internet in the mid-to-late ’90s. Suddenly research that once required Mead’s Law Library and a prayer was available at your fingertips via RIA Checkpoint and BNA. Did it replace us? No. It made great advisors even better and exposed the mediocre ones.

Then e-filing, cloud computing, and portals, QuickBooks Online, document management systems, cloud-based ERPs. Each time, the profession said “not us, not now.” Each time, the profession adapted and grew stronger.

Think of it like the music industry. When streaming services like Spotify arrived, record labels cried the apocalypse. But the best artists didn’t disappear they evolved their model. The ones who refused to adapt? They’re the ones that disappeared.

Same story in retail. Amazon didn’t kill retail. It killed mediocre retail. The Hermès stores of the world, the boutiques with irreplaceable human expertise and relationships, are busier than ever.

Generative AI is this decade’s version of that moment. And friends, the window to get ahead of it is RIGHT NOW.

So What IS Generative AI, and Why Should I Care?

Here’s the deal. Traditional AI, the kind already baked into your tax software, follows rules, identifies patterns, and flags exceptions. Think: the IRS’s own document matching algorithms. That’s old news.

Generative AI (GenAI) is fundamentally different. Tools like ChatGPT, Microsoft Copilot, Google Gemini, and Claude don’t just match patterns, they create . They draft documents, synthesize complex research, write memos, model scenarios, and generate responses to nuanced questions in natural language. They learn from themselves. They can make what the OPR rightly calls “discretionary decisions, devoid of human interaction.” Don’t get me started on the major improvements this technology makes on tax strategy development based on our prioprierary methods and libraries. It is is magical.

That last part should give you both excitement and pause. More on that in a moment.

Here’s what the data tells us: AI-powered tax research adoption among CPA firms has nearly doubled in one year, jumping from 33% of firms using AI for tax research weekly in 2025 to 60% in 2026 . Advisory projects (44%) and tax planning (40%) are the top use cases. And 69% of practitioners now say they’re moving toward value-based, hybrid, or fixed-fee billing as AI commoditizes routine knowledge work. This is not a trend. This is a transformation and we are excited to be leading the way for several years now.

What GenAI Actually Does for Tax Advisors

Let me get concrete, because that’s where I live. Here’s where generative AI is genuinely game-changing for our world:

• Tax Research — Turbocharged. What once took hours of crawling through treatises, PLRs, and case law can now begin with a well-crafted prompt. Thomson Reuters’ CoCounsel, Bloomberg Tax’s AI tools, and Blue J are delivering research synthesis in minutes. The caveat? You still have to verify everything . (More on this soon.)
• Scenario Modeling and Planning Memos. Want to draft a memo comparing a Section 1202 QSBS exclusion strategy layered with an Opportunity Zone investment and an installment sale? GenAI can produce a solid first draft. I repeat: a first draft . Not a finished product.
• Document Analysis at Scale. Reviewing hundreds of pages of purchase agreements, operating agreements, and financial statements for M&A due diligence? AI can triage and flag in a fraction of the time.
• Client Communication. Drafting client-facing summaries of complex tax legislation, like translating 300 pages of OBBB guidance into something a business owner can actually act on is where GenAI shines.
• Workflow Automation. Document intake, data extraction, exception management, review-ready return preparation the agentic AI systems of 2026 are doing all of this autonomously within defined parameters.

The efficiency gains are real. Research suggests AI could free up four hours per week within one year , scaling to 12 hours per week within five years . For a boutique advisory firm like ours, that’s not headcount reduction that’s capacity to deepen relationships and pursue higher results for our clients.

The IRS Is Using AI Too — And It’s Watching You

Holy cannoli, this part matters. The same technology transforming our advisory work is being weaponized, and I mean that constructively, by the IRS.

As of June 2025, the IRS maintained 126 active AI use cases , up from just 10 in August 2022 . These aren’t toys. They include:

• AI-driven audit selection for large partnerships (assets over $10M) and mid-market corporate returns ($10M–$250M)
• Real-time fraud detection across millions of returns simultaneously
• Criminal investigation support, cutting analysis that once took hours down to minutes
• AI-assisted identification of abusive tax shelters, unreported crypto transactions, and improperly claimed credits (hello, ERC mills)
• Chatbots handling routine taxpayer inquiries to reduce human staffing

Translation for our clients: document consistency, coherent filing positions, and defensible strategies matter more than ever. The days of hoping a questionable position would “slip through” because the IRS didn’t have enough agents are over. The algorithm never sleeps, never takes a lunch break, and never misses patterns in your Schedule K-1s.

For entrepreneurs and high-net-worth individuals, our core clients, this is a direct call to action: get your tax house in order. Every position should be defensible. Every strategy should have substance. The IRS’s AI doesn’t care how many years you’ve been doing something a certain way.

The IRS OPR Just Dropped the Rules — And You Need to Know Them Cold

On June 24, 2026, the IRS OPR issued its landmark “Introductory Guidelines for Responsible AI Use in Federal Tax Practice.” This is the first formal guidance tying generative AI use directly to Circular 230, the bible for federally authorized tax practitioners. Here are the five non-negotiables:

1. Due Diligence (§10.22) — AI Is Not a Sign-Off

When you use GenAI, you must thoroughly review all AI-created documents before delivery to a client or the IRS . The OPR was explicit: due diligence requires “verifying the accuracy of facts, citations, and calculations produced by AI.” Practitioners cannot delegate their professional responsibility to an algorithm. Period. Courts have already sanctioned attorneys with financial penalties, public censure, and disciplinary referrals for AI hallucinations in legal filings. Tax practitioners are next.

1. Fees (§10.27) — You Can’t Double-Bill for AI Efficiency

This one is going to sting some people. The OPR said it clearly: if AI reduces your research and drafting time, billing clients as if you did it manually may violate §10.27 . “Cost savings should be passed on openly, with billing practices that reflect the efficiencies gained.” This is why 69% of practitioners are already pivoting to value-based billing and why we’ve always believed in it at Cordasco & Company. I tis the fair way to bill based on results, outputs not inputs.

1. Competence (§10.35) — You Must Understand the Technology

Practitioners must “understand both the law and the technology used in their representation of clients.” You need to understand how AI develops content, recognize the potential for bias or errors, and evaluate whether AI outputs are suitable for use in IRS matters. Ignorance is not a defense. “I just used ChatGPT” is not a reasonable cause argument.

1. Firm Oversight (§10.36) — Your Firm Needs Written AI Policies NOW

Managing partners and principals are personally responsible for ensuring your firm has adequate AI compliance procedures covering staff training, data handling protocols, AI accuracy monitoring, and vetting of third-party AI providers. If your people are using AI tools without a firm policy in place, you are exposed.

1. Written Advice (§10.37) — AI Is a Starting Point, Not a Deliverable

Tax opinions, planning memos, and written advice must be based on reasonable factual and legal assumptions independently verified by the practitioner. The OPR was direct: practitioners “must independently authenticate all factual and legal information” used in written advice. “Blind reliance on what AI yields… may constitute unreasonable reliance.”

The Big Risk No One Talks About Enough: Data Security and Hallucinations

Two words that should keep every tax advisor up at night: hallucinations and data leakage.

Hallucinations are GenAI’s tendency to confidently fabricate things that don’t exist like non-existent IRC sections, phantom court cases, invented PLRs. Deloitte Australia learned this the hard way in 2025 when a government report they prepared, reportedly using GAI, contained invented judicial quotes, references to non-existent reports, and books ascribed to the wrong authors. They reportedly had to partially refund the engagement fee. Imagine that playing out in a tax controversy.

Data leakage is even more insidious. When you upload client financials into an unsecured public AI platform, you are potentially allowing that data to be used to train future models or worse, repurposed in responses to other users. The IRS OPR specifically flagged this: “client privacy can be compromised when data generated for one client is repurposed by the program to respond to an inquiry concerning another client.” IRC §§6713 and 7216(a) impose civil and criminal preparer penalties for unauthorized disclosure of tax return information. This is not hypothetical. This is a live exposure.

Bottom line: Never. Upload. Client. Data. To. Public. AI. Platforms. Full stop. Enterprise-grade, privacy-protected tools only.

The Irreplaceable Human: Why This Is Actually Our Moment

Here’s where I want to push back on the doom-and-gloom narrative. I can tell you based on my experience that every disruption in this profession has rewarded the advisors who lean into change while doubling down on what machines cannot do.

What can’t AI do? It cannot:

• Sit across from a business owner at a critical inflection point and understand what they actually care about versus what they think they care about
• It cannot understand a client’s Telos, aka purpose or end game.
• Exercise judgment in a gray area where the law is ambiguous and the facts are complex
• Build the trust that makes a client pick up the phone at 7 PM when something goes sideways
• Architect a layered strategy — say, QSBS + Opportunity Zones + estate freeze — that’s tailored to this client’s life stage, risk tolerance, and family dynamics
• Be accountable. At the end of the day, only a licensed professional can sign their name to a position and stand behind it

A recent survey found that 84% of tax professionals say AI saves them time and that most are reinvesting that time in client relationships, work-life balance, and higher-quality advice. That is the right answer. AI handles the mechanics. We handle the people and judgment.

The future of our profession, as Thomson Reuters put it, is “human-led and AI-enabled.” I refer to it as “augmented Rob” which makes me a much better practitioner.

What You Need to Do Right Now

Whether you’re a client of ours wondering how to evaluate your current advisors, or a fellow practitioner figuring out your AI strategy, here is your action list:

For Tax Practitioners:

1. Draft a firm AI policy today. It must cover permissible tools, prohibited data uploads, documentation requirements, client disclosure, staff training, and third-party vendor vetting. The OPR expects it under §10.36.
2. Use only enterprise-grade, privacy-protected AI tools. No client data goes into public platforms. Ever.
3. Verify everything AI produces. Every citation. Every calculation. Every legal reference. Treat AI output as a highly capable first draft from a very confident, occasionally delusional junior associate.
4. Align your billing model with reality. If AI is saving you time, your billing should reflect it. Value-based and fixed-fee models are the future and frankly, clients prefer them.
5. Stay current on guidance. The OPR’s June 24, 2026 alert is the starting gun, not the finish line.

For Business Owners and HNW Individuals:

1. Ask your advisor whether they have a documented AI policy. If they look at you blankly, that’s your answer.
2. Insist that any advice delivered to you has been human-reviewed and human-verified. AI-assisted is great. AI-only is a liability.
3. Understand that the IRS’s AI is analyzing your returns. Defensibility of positions matters more than ever. Substance over form. Documentation over hope.
4. Use this AI moment to upgrade your advisory relationship. The efficiency gains should translate to more proactive planning, not just cheaper compliance.

The Bottom Line

Generative AI is not the end of the tax advisor. It is the elevation of the tax advisor. The ones who will win are those who use these tools brilliantly, responsibly, and with unwavering commitment to the judgment, ethics, and client relationships that no algorithm can replicate.

We started this firm in 2007 with a simple premise: strategic tax planning is wealth preservation, and our clients deserve advisors who are with them for the whole journey not just at tax season. AI doesn’t change that premise. If anything, it amplifies it. The compliance factories are going to get more automated and cheaper. That’s fine with us. We’ll be doing the work that actually moves the needle for our clients’ lives.

The IRS is watching. Smarter than ever. The OPR has spoken. The technology is real. The opportunity is enormous.

Time to play offense. 🚀

Want to talk through what AI means for your tax strategy, your planning, or your business? We’d love the conversation.

📩 Reach out to us at [email protected]

Grazie Mille, Ciao!