Where a return goes when you paste it
Lesson 5 of 5 · The practitioner's week
1 · Learn the move · Red-team audit
Pasting is the part nobody thinks of as a disclosure. You are in a hurry, the question is specific, and the client's name is right there in the notice. The rules below do not ask whether the tool is good. They ask where the information goes when you press enter. IRC s. 7216 is criminal: knowing or reckless disclosure or use of tax return information risks a fine, prison, or both [P]. IRC s. 6713 is the civil twin, a penalty per disclosure with an annual cap [P]. Treas. Reg. 301.7216-3 says what valid consent looks like: written, knowing and voluntary, naming you, the taxpayer, the purpose, the recipients and the information, signed and dated, uses and disclosures on separate documents, and no consent can send a Social Security number to a preparer outside the United States [P]. The IRS Office of Professional Responsibility has applied Circular 230 to AI: practitioners must handle client data using secure, enterprise-approved AI, and AI cost savings are credited to the client [P]. Open question: whether a paste into a general-purpose AI tool is a s. 7216 disclosure. One secondary analysis says it is, and says the IRS has issued no guidance; we found no court or IRS ruling either way [S]. Open question: whether stripping names takes a fact pattern outside s. 7216. We found no ruling that it does [M]. Three uses are clearly allowed: drafting and research help in a tool your firm has approved for client data, with every output checked by you; questions built from de-identified facts, which lowers exposure and is not a settled safe harbor; and disclosure under a consent that names the tool, the data and the purpose, on its own signed document [P]. The pattern that draws sanctions is delivering authority you never opened: a section, a case, a quotation, a figure that came from the model and went to the client or the Service untouched. A large firm with a policy, reviewers and a name to protect delivered a government report carrying fabricated references and an invented judge's quotation, and repaid part of the contract [S]. The rule to repeat: only de-identified facts go in unless the client signed a consent naming the tool, and you read every citation yourself. Draft copy, not legal advice. Reviewed by: nobody yet.
Here are the rules I work under: [paste the rules above in your own words]. Here is one thing I did with AI this week, with what I pasted and what came back: [paste, de-identified now even if it was not then]. Act as the reviewer trying to find the line that gets me sanctioned. For every item I pasted that came from a client file, quote it and name the rule. Flag any Social Security number, EIN, account number, or client name near a dollar figure. Ask which tool and plan it was, and whether the firm approved it for client data. Ask whether a signed consent names that tool. For every authority that came back, ask whether I opened it. Do not soften anything; only flag it. End with the one change I make on Monday, as a line I can keep with the workpapers.
The facts this lesson rests on, dated
Each line names the source grade the lesson shows, [P] primary, [S] secondary, [M] unverified, and the day it comes due. Past that day, treat it as a question. Draft copy, not legal advice.
- IRC s. 7216 makes knowing or reckless disclosure or use of tax return information by a preparer a misdemeanor: a fine of up to $1,000, imprisonment of up to one year, or both, with s. 6713(b) raising the fine ceiling in some cases. [P] (researched Oct 6, 2026, not yet confirmed by a person, recheck by Dec 15, 2026). source
- IRC s. 6713 imposes a civil penalty of $250 per unauthorized disclosure or use of tax return information, capped at $10,000 a calendar year. [P] (researched Oct 6, 2026, not yet confirmed by a person, recheck by Dec 15, 2026). source
- Treas. Reg. 301.7216-3 requires a consent to be written, knowing and voluntary; to name the preparer, the taxpayer, the purpose, the recipients and the information; to be signed and dated; uses and disclosures on separate documents; one-year default duration; and no consent permits sending a Social Security number to a preparer outside the United States. [P] (researched Oct 6, 2026, not yet confirmed by a person, recheck by Dec 15, 2026). source
- Treas. Reg. 301.7216-2(d) and (h) list disclosures and uses permitted without consent, including to other preparers assisting on the return under conditions the regulation states. [P] (researched Oct 6, 2026, not yet confirmed by a person, recheck by Dec 15, 2026). source
- IRS Office of Professional Responsibility Alert 2026-19 (2026-06-24) applies Circular 230 ss. 10.22, 10.27(a), 10.35, 10.36, 10.37 and 10.51(a)(15) to AI use: practitioners must handle client data using secure, enterprise-approved AI, and AI cost savings should be credited to the client. [P] (researched Oct 6, 2026, not yet confirmed by a person, recheck by Dec 15, 2026). source
- A 2026-03-19 practitioner analysis concludes that pasting client return information into a general-purpose AI tool is a s. 7216 disclosure and notes the IRS has issued no guidance on the point; no court or IRS ruling either way was found. [S] (researched Oct 6, 2026, not yet confirmed by a person, recheck by Dec 15, 2026). source
- No ruling was found holding that removing names takes a fact pattern outside s. 7216; de-identification lowers exposure and is not a settled safe harbor. [M] (researched Oct 6, 2026, not yet confirmed by a person, recheck by Dec 15, 2026). research pack A_licensed_professions.md (parity run 2026-10-05)
- The Texas State Board of Public Accountancy's August 2026 newsletter states that the Act and Rules do not address generative AI. [P] (researched Oct 6, 2026, not yet confirmed by a person, recheck by Dec 15, 2026). source
- AICPA Code ET 1.700.001 (Confidential Client Information Rule) bars disclosing confidential client information without specific consent, on top of s. 7216; competence under ET 1.300.001 applies to AI-assisted work, per a 2026-08-05 JofA article. [S] (researched Oct 6, 2026, not yet confirmed by a person, recheck by Dec 15, 2026). source
- Deloitte Australia delivered a government report carrying fabricated references and an invented judge's quotation and repaid part of an A$439,000 contract (2025); OPR cites it as the preview of practitioner sanctions. [S] (researched Oct 6, 2026, not yet confirmed by a person, recheck by Dec 15, 2026). research pack A_licensed_professions.md (parity run 2026-10-05), via the OPR alert
- No CPA board or OPR discipline for AI misuse was found as of the check date; OPR points to lawyer sanctions as the preview. [S] (researched Oct 6, 2026, not yet confirmed by a person, recheck by Dec 15, 2026). research pack A_licensed_professions.md (parity run 2026-10-05)
2 · Your turn. You write the prompt
The senior at Harlow & Vance, honest in the retrospective: on Tuesday she pasted Delia Marsh's CP2000 into a consumer chatbot, name, year and amounts included, asked what to do, and sent the client a summary with the two sections the chatbot cited. She has not opened either section. The partner wants the review done on this one case before the firm's AI policy is written.
Write the prompt for this scenario as given, or swap in a real one from your own work. The score works the same either way.
Remember: the AI sees only your prompt, not this page. If the situation isn't in your prompt, it doesn't exist.
Optional. These shape the output when you run your prompt below, not your score.