How to choose an AI tool for a CPA firm

Write one sentence before you book a demo:

We want the tool to take [this input] and produce [this output] for [this role] to review, on [this many] clients, without it [this red line].

Examples you can steal the shape of:

• Take portal uploads and produce a missing document list for admin to send.
• Take a prior year 1040 and produce a draft organizer checklist for a preparer to edit.
• Take the inbox and produce a sorted queue with draft replies, none of which send themselves.

If the vendor cannot demo that sentence on sample files you bring, you do not have a candidate. You have a slideshow. The split of what an assistant may run alone versus draft is in what to delegate to an AI assistant. The same split applies inside a CPA firm, with a harder red line around tax positions and filing.

Ask these in writing. Keep the answers in the vendor file.

Publication 4557 is the IRS guide for tax professionals on safeguarding taxpayer data. It says protecting that data is the law, that the FTC sets safeguard rules for professional tax return preparers, and that you must create and enact a security plan. It points to Publication 5708 for a written information security plan. Failure may mean an FTC investigation. (Publication 4557)

Use that publication as a vendor filter, not as wallpaper. At minimum the product should let you do what 4557 already tells you to do:

• Limit access to people who need the file
• Turn on multi factor authentication for anyone who can see client information
• Encrypt files and messages that carry personally identifiable information
• Keep an audit log of who did what, when
• Wipe devices and exports you no longer need
• Back up to a place that is not sitting on the same live network all day

4557 also tells you to be able to recognise phishing that pretends to be the IRS, a tax software vendor or a cloud storage vendor. An AI tool that emails staff with surprise links fails that test on day one. (Publication 4557)

The FTC's Safeguards Rule applies to financial institutions under FTC jurisdiction. The Rule's examples of financial institutions include tax preparation firms. Covered firms must develop, implement and maintain a written information security program with administrative, technical and physical safeguards for customer information. The program has to fit the size of the business and the sensitivity of the information. (FTC Safeguards Rule: what your business needs to know)

That is why an AI vendor is not "just software." The Rule requires you to select service providers that can maintain appropriate safeguards, to put your security expectations in the contract, to monitor their work, and to reassess them. You also need a designated Qualified Individual, a written risk assessment, access controls, encryption of customer information at rest and in transit (or an equivalent control your Qualified Individual has approved), multi factor authentication, secure disposal, staff training, testing, a written incident response plan, and a regular written report to the board or a senior officer. (FTC Safeguards Rule)

Before you sign, get in writing:

• That they are a service provider under your program, with the safeguards you require named in the contract
• Where data is stored and processed, and a current subprocessor list
• Encryption in transit and at rest
• Multi factor authentication for their staff and for yours
• How soon they will tell you about a security event
• How you retrieve and delete client data when the contract ends

The FTC has an exemption from some provisions for firms that maintain customer information on fewer than 5,000 consumers. Do not treat that as permission to skip a plan. Publication 4557 still tells tax professionals, including sole practitioners, to have one. (Publication 4557) Ask your attorney whether the exemption applies to you. Do not ask the vendor.

The AICPA Statements on Standards for Tax Services that took effect on 1 January 2024 added enforceable standards on data protection, reliance on tools, and representation of tax clients before taxing authorities. They apply to AICPA members. (Statements on Standards for Tax Services No. 1 to 4) Read the standards themselves before you rely on a tool for tax work. This page is not a substitute for that reading.

AICPA's own note on IRS Office of Professional Responsibility guidance from June 2026 puts the same point in one line: AI can help, but it does not replace professional judgement. Use it with human oversight, due diligence, confidentiality safeguards and accountability. (Introductory guidelines for responsible AI use in federal tax practice)

Translate that into product rules:

• A person at the firm reviews every client facing message before it sends.
• A CPA reviews every number that will appear on a return.
• The tool cannot file, sign or create an IRS login action.
• The tool cannot set a tax position, an estimated payment or an extension decision.
• If the tool cannot show the source document behind a figure, the figure is not used.

If a salesperson says the product "handles the return" or "sends the organizer so you do not have to look," that is a no. Drafting is fine. Unreviewed sending is not.

Do not trial on live clients until the vendor has cleared the security questions. Then run a short, ugly test:

• Ten finished files with client names and identifiers removed, or sample files you build yourself.
• At least two messy ones: a corrected 1099, a K-1, a photo of a W-2, a packet that belongs to two people.
• Score: items correctly named, items missed, items invented, minutes of review needed.
• Have the reviewer who would do this in season run the test, not the partner who bought the demo.
• Write down the false confidence. If the tool sounds sure when it is wrong, that is worse than a miss.

If the job you wanted was tax season chasing with a person in the loop, you may not need a new platform. See how the tax season operator works. A person at your firm approves every client facing message. Your CPA reviews and signs every return.

Download the evaluation checklist. It is a spreadsheet with the questions in this guide, a place for the vendor's answer, a pass or fail column, and a line for who at the firm signed off. Fill one sheet per vendor. Keep it with the contract.

Reopen the sheet at least once a year, or when the vendor adds a model, a subprocessor or a new workflow that touches taxpayer data. The FTC expects you to reassess service providers. Treat that as a calendar item, not a hope.