AI tools for independent tax preparers -- what they do, and what they cost.

In most cases, yes. Internal Revenue Code Section 7216 controls what you may do with a client’s return information, and sending that information to an outside AI tool is a disclosure. Section 7216 is a criminal statute. Knowingly or recklessly disclosing or using return information without the required consent carries a fine of up to $1,000 and up to a year in prison per violation, plus separate civil penalties under Section 6713. Treasury Regulation 301.7216-2 lists the narrow disclosures allowed without consent. Get the consent in place before the first document moves, and confirm what your situation needs with your own compliance counsel.

Some tools say they do. Drake says its SmartExtract feature automatically extracts data from supported tax documents -- W-2s, 1099s, K-1s -- and populates it directly into tax returns. That feature is in beta, it is free during the beta, and it works in Drake Tax Online only; Drake says desktop support is rolling out in the coming months. Intuit ProConnect Tax describes intelligent data import that pulls data out of source documents. GruntWorx does the same job, but read its own product page: it calls the work OCR (optical character recognition, software that turns a scanned page into readable text) and automated data extraction, not AI. Whichever you use, you are still the one who checks every extracted figure against the paper. A K-1 is the form that reports a partner’s or shareholder’s share of income.

The IRS Office of Professional Responsibility issued Alert 2026-19, “Introductory Guidelines for Responsible AI Use in Federal Tax Practice,” on June 24, 2026. Due diligence under Circular 230 Section 10.22 means you review every AI-produced document and verify the facts, citations and calculations before it goes to a client or the IRS. Relying on the AI alone is not due diligence. Competence under Section 10.35 now includes understanding the tools you use, how they fail, and their risk of bias or error. Section 10.36 calls for written firm procedures covering staff AI training, secure data handling, monitoring AI accuracy, and vetting a third-party AI tool before you adopt it. Section 10.37 says AI-generated projections and citations cannot be relied on without independent verification, and if you cannot see how the AI reached its answer, relying on it may be unreasonable. On fees, Section 10.27(a): if AI cuts your time, billing for manual hours you did not work, or double-billing for AI-assisted work, can be an unconscionable fee, and the alert says cost savings should be passed on and disclosed openly. The alert also cites a real case -- Deloitte Australia had to partially refund a government client after an AI-assisted report contained fabricated quotes and citations.

It depends on how the vendor bills, and the models are not comparable. SmartVault’s SmartRequestAI add-on is $12.50 per return, sold in 50-return bundles at $625 a bundle. Intuit ProConnect Tax is $76.97 per individual return pay-as-you-go and $90.96 per business return, dropping to as low as $30.07 per individual return if you buy 200 or more ahead -- and there is a required User Access fee of $105 per user, or $2,100 flat for 10 or more users, on top of the returns. Drake Tax Pay-Per-Return is $379.99 for tax year 2026 including 10 returns, then $49.99 per extra individual return and $74.99 per extra business return. Do the division against your own return count before you sign anything, and make any quote-based vendor put the per-return number in writing.

Yes, it does. A WISP is a Written Information Security Plan. Tax preparers are treated as financial institutions under the Gramm-Leach-Bliley Act, so the FTC Safeguards Rule (16 CFR Part 314) applies to you. The rule names what the plan has to include: a qualified person in charge, a risk assessment, access controls, encryption, multi-factor authentication, staff training, vendor oversight, and an incident-response plan. A breach affecting 500 or more people has to be reported to the FTC within 30 days. There is no small-firm exemption -- a solo preparer with one client is covered. Any new AI tool has to be named in your WISP and vetted as a vendor. The IRS publishes a free WISP template in Publication 5708.

It keeps billing. This is the cost trap for a seasonal shop, and vendors do not lead with it. Canopy Standard is $74 per user per month billed annually. SmartVault Business Pro is $55 per user per month with a three-user minimum; Accounting Pro is $65 with a two-user minimum. TaxDome Essentials is $700 to $800 per seat per year, and the low end of that range means prepaying up to three years up front. None of those stop charging in July because nobody logged in. Per-return pricing behaves differently -- you pay when you file. Before you buy, work out the 12-month cost, not the four-month cost.

When the size does not match. A one-person shop doing 60 returns a season has no business buying a $3,145 unlimited Drake license or a $1,498-a-year Blue J research seat. Both are priced for volume you do not have. Multi-seat platforms are the same story: TaxDome Essentials is single-seat only, and every SmartVault plan carries a user minimum you would pay for whether you fill it or not. And if the season is already running, do not start a setup you cannot finish. A tool you buy in February and cannot get working before the rush costs you the season it was meant to save.