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Good morning, friends. The IRS put it in writing this week: Circular 230 applies to AI, and four specific obligations go with it. A new report says 40% of workers used AI to fake expense receipts with tools their employers paid for. The Supreme Court also passed on limiting how long the IRS can pursue preparer fraud. Have a good Friday.
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In This Morning's Issue
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IRS ties Circular 230 to AI use in tax practice
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No. 01
| TAX COMPLIANCE
| Lead Story
IRS ties Circular 230 to AI use in tax practice
The IRS Office of Professional Responsibility published OPR Alert 2026-19 on June 24. It makes clear that Circular 230 applies to AI in tax work. Four obligations now apply. Verify every AI output before relying on it. Pass the time savings to clients rather than pocketing the margin. Know your tool well enough to catch its mistakes. Keep client data inside approved platforms only. No effective date is listed — OPR says these were always in force.
The Signal — Most accounting firms have no process for documenting AI use at the file level. That gap is what OPR will ask about if a complaint comes in. The alert does not create new rules. It says the rules already applied and firms were expected to follow them. Practitioners who treat AI as an informal time-saver now have a documented reason to build a paper trail. What to watch: Watch for state CPA boards to layer their own AI guidance on top of OPR Alert 2026-19. Also watch whether the AICPA incorporates the alert into its ethics standards before year end.
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External links — the most worth-clicking AI items from around the web this week.
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Workflow of the Week
Lili MCP Server (lili.ai)
Lili launched a tool that lets AI assistants pull financial data directly from your accounting system without manual file exports. It uses a standard called MCP, which connects AI tools to live data sources instead of requiring manual uploads. Worth testing if you manage 10 or more bookkeeping clients and already use an AI tool in your practice.
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From the Archive
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That's the dispatch.
If something here changed how you think this week, hit reply and tell me. I read every one.
— Jim
Jim Smart · Founder, Nexairi
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— The Letters Desk —
Write back. We're listening.
Every reply lands in the editor's inbox. Tell us what hit, what missed, or what we should chase tomorrow — one sentence is plenty.
Or just hit reply. [email protected]
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