Firm compliance kit: AI and §7216
Why a consent
A tax return preparer may not disclose or use a client's tax return information without the client's written consent unless section 7216 or 26 CFR 301.7216-2 allows it (301.7216-3(a)). 301.7216-2 allows disclosure to auxiliary service providers that help prepare, process or file returns; the IRS has not said whether a general-purpose AI company is one, and most commentary says it probably is not. OPR Alert 2026-19 says practitioners "must strictly handle all client data using only secure, enterprise-approved AI" and should vet third-party AI tools. A signed consent that names the AI company, the information, the purpose and the duration closes the question for that client.
What Evenbead does about it:
- Names the AI company behind every agent. Each agent key and AI-app connection declares its provider (Anthropic, OpenAI, Google, xAI, another, a self-hosted model, or not AI). Connecting an AI app asks for it.
- Keeps external AI out until the client consents. Turn on "Require a §7216 consent before external AI can access a client" (on by default once you tell Evenbead you prepare tax returns). An agent run by an outside AI company then reads a client's books only with a signed, unexpired consent from that client naming that company. Enforced in the API and in the database.
- Evenbead's own AI is not external. Categorization suggestions, Clef and receipt reading run on machines Evenbead operates as your books software, labelled "Evenbead (software vendor, US)".
- The consent itself: generated per client and provider from the template below, sent through the client's Requests and email, signed by the client's owner in the app (typing their name, ticking each provider) or uploaded as a signed PDF with your attestation; versioned, revocable at any time, in the audit log, exported as a PDF or JSON record.
1. Engagement letter: AI paragraph (template)
Keep the consent itself a separate document (Rev. Proc. 2013-14 §5.01 allows attaching it to the engagement letter). Do not make your services conditional on it: a consent obtained that way is not valid (Rev. Proc. 2013-14 §5.04(1)(a)).
2. Firm WISP: AI section (template)
Add to your Written Information Security Plan (see also docs/security/firm-wisp-template.md in the repository, §AI):
- Approved AI. Only AI systems on the firm's approved list may touch client data. Approval requires: a business or enterprise agreement (not a consumer plan), a data processing agreement, no training on our inputs, a stated retention period (zero-data-retention where offered), and a known processing location. Record the review date. Evenbead's provider registry (Settings, AI consent;
GET /v1/ai-providers) lists the facts to check, not a substitute for reading the terms. - Declared providers. Every agent and AI app connected to client books declares its AI provider in Evenbead. Nobody connects an undeclared or consumer AI account.
- Client consent. The firm setting "Require a §7216 consent before external AI can access a client" is on. Consents use the firm's attorney-reviewed wording, name each provider, and are renewed before they expire. A change of provider gets a new consent.
- Least data. Agents get the narrowest level (Read only or Suggest) and the clients they need. Full SSNs and EINs are never given to AI (Evenbead shows agents only the last four digits).
- Human review. AI output is a draft. A person reviews entries above the agent's posting threshold, and every return, memo or letter, before it is relied on (Circular 230 §§10.22, 10.37).
- Records. Keep the consent records (Evenbead's PDF/JSON export), the audit log of agent actions, and the monthly agent audit report. Retain them with the client file.
- Incidents. If client data reaches an unapproved AI system: stop the agent (kill switch), revoke its keys, record what was disclosed, and follow the incident steps of this plan.
- Training. Staff who use AI are trained on these rules and on AI's limits (hallucinations, bias, opacity) at hire and yearly.
3. OPR Alert 2026-19 checklist, mapped to Evenbead
| OPR Alert 2026-19 says | What to do | Where Evenbead helps |
|---|---|---|
| "Practitioners must strictly handle all client data using only secure, enterprise-approved AI" (IRC §§6713, 7216) | Approve AI providers; never use consumer AI accounts on client data | Provider declared on every agent and AI app; external AI kept out of a client without a consent naming it; Evenbead's own AI runs on Evenbead-operated machines |
| "Outsourced or third-party AI tools should be vetted" (§10.36) | Review each provider's terms, DPA, retention, training use and location before use | Provider registry with location and data-handling notes and a review date; one consent per provider, so a change of provider is visible |
| "Established protocols for secure data handling" and "access controls" | Least access per agent and client; two-factor sign-in for staff | Agent levels (Read only, Suggest, Post within limits), per-client assignment and thresholds, firm two-factor requirement, kill switches |
| "Document AI usage and verification processes"; "all steps and processes documented to show adherence to section 10.36" | Keep a record of which AI touched which client, when, under which consent | Hash-chained audit log with the agent and declared model on every action; refusals recorded; §7216 log; consent record export (PDF/JSON); monthly agent audit report |
| "Foster transparency and accountability" | Tell clients which AI companies you use | The consent names each company; clients see every AI agent that reaches their books and its provider |
| Due diligence (§10.22) and written advice (§10.37): verify AI output; "treat the advice as a starting point" | A person reviews AI work before relying on it | Proposals: agent work above its threshold waits for a person; Suggest-level apps never post |
| "Prepare clear procedures for handling breaches or errors" | Incident steps in the WISP | Kill switch (company and firm), key and connection revocation, consent revocation take effect at once |
| "Provide necessary staff training" | Train staff on the WISP AI section | Not a software feature: record training in your WISP |
| Fees (§10.27): bill for time actually spent | Pass AI efficiencies on openly | Not a software feature |
4. The consent template
Generated per client and provider in Settings, AI consent (or GET /v1/company/ai-consents/template). It contains, in this order: a template notice; the title; the taxpayer and the tax return preparer (301.7216-3(a)(3)(i)(A)); Rev. Proc. 2013-14 §5.04(1)(a)'s two mandatory paragraphs, word for word; what would be disclosed (the categories chosen; 301.7216-3(a)(3)(i)(C)) and that a more limited disclosure may be requested (§5.06); the purpose (301.7216-3(a)(3)(i)(B)); each recipient AI company with its own unticked box (§5.05: each disclosure selected affirmatively); the duration (the date chosen, or one year from signing); the right to revoke; §5.04(1)(e)(i)'s statement when a provider is outside the United States; §5.04(1)(d)'s TIGTA statement; and the signature and date (301.7216-3(a)(3)(i)(E)). Electronic signature follows Rev. Proc. 2013-14 §6.02(b): the taxpayer types their name; the software never fills it in. A signed consent's text never changes (§5.04(4)).
Questions for your attorney: whether your AI use is a "disclosure" or a "use" (Evenbead's template is a disclosure consent; a use consent has different mandatory statements, §5.04(1)(c)); whether a recipient AI company may itself be an auxiliary service provider for your workflow; state-law requirements; and the wording for business (non-1040) clients, which may use any format that meets 301.7216-3(a)(3)(i).