Artificial intelligence is changing how tax and accounting professionals work. Across the profession, firms are using AI in general ways to improve efficiency, speed up research and drafting, and streamline internal workflows, but those efficiency gains do not change a practitioner’s ethical duties under Circular 230.

This matters most in one area clients understand immediately: fees. The IRS Office of Professional Responsibility has recently emphasized that practitioners cannot bill as though they manually spent hours that were not actually working simply because AI shortened the process.

Circular 230 still applies to AI-assisted work

Circular 230 governs practice before the IRS and covers due diligence, competence, written advice, confidentiality, supervision, and fees. In its 2026 guidance, OPR confirmed that these existing duties apply fully when tax practitioners use AI, and that AI is a tool to assist professionals, not replace professional judgment.

That means the practitioner remains responsible for the final work product. Facts, authorities, calculations, projections, and conclusions generated with AI still must be reviewed and independently verified before they are provided to a client or submitted to the IRS.

Practitioners cannot charge for time not actually worked

Circular 230 §10.27 prohibits a practitioner from charging an unconscionable fee in connection with a matter before the IRS. OPR’s AI guidance goes further by warning that when AI materially reduces the time needed for research or drafting, billing for manual labor or time that was not actually spent may violate that rule, depending on the facts.

Put simply, if a task once took five hours but now takes one because technology made the process more efficient, the bill should reflect that efficiency. The IRS guidance says cost savings from AI should be passed on openly and that billing practices should fairly credit those reductions to the client’s account.

Why firms are moving away from hourly billing

This guidance does not outlaw hourly billing, but it does increase pressure on firms to rethink how they price services in an AI‑enabled environment. In CAS, the shift is already well underway: the 2024 CAS Benchmark Survey indicates that hourly pricing dropped from 53% of firms in 2018 to 10% in 2024, while 84% of firms now primarily use fixed‑fee agreements.

Broader pricing data shows a similar move across the profession. The 2025/2026 U.S. Accounting and Tax Pricing Benchmark reports a decline in hourly billing and growth in fixed‑fee and value pricing across major service lines, while 80% of firms expect to raise fees heading into 2026, mostly by 5% to 10%.

Fixed fees and value‑based pricing

As technology reduces the time required for many services, more firms are using fixed fees or a defined range of fixed fees for recurring and well‑scoped work such as returns, bookkeeping, advisory packages, and IRS responses. A fixed fee can be more transparent because it reflects the nature of the work, expected complexity, professional judgment involved, and the responsibility assumed, rather than a reconstructed hourly total that no longer matches reality.

For higher‑impact services, many firms are turning to value‑based pricing, which links the fee to the importance of the outcome—such as tax savings, risk reduction, planning benefits, or penalty avoidance—while still keeping the fee reasonable under Circular 230’s unconscionable fee standard. This does not mean charging a percentage of a client’s tax refund or credit (for example, a share of an individual income tax refund), which is generally prohibited in tax practice; instead, value‑based fees must be structured as fixed amounts or clearly defined fee ranges that reflect the work performed and the professional judgment involved, rather than a direct cut of the client’s refund.

Conclusion

The direction of the profession is becoming clearer. AI is accelerating how tax work gets done, but Circular 230 still requires practitioners to bill fairly, verify their work, and exercise independent professional judgment at every step, especially avoiding any AI‑related errors or hallucinations. As more firms move from hourly billing to fixed fees, fee ranges, and value‑based pricing, the core principle remains the same: clients should pay for real work, real judgment, and real value—not for hours that technology eliminated.

Journal of Accountancy – IRS outlines AI risks, Circular 230 duties for tax practitioners

Thomson Reuters – IRS Office of Professional Responsibility issues guidelines on AI use in tax practice