On September 8, the AICPA asked the IRS to clarify guidance suggesting that tax practitioners should pass AI-related cost savings on to clients.

If an AI tool turns two hours of research into 30 minutes, an hourly invoice should not claim two hours of manual work. But the firm still pays for the software, trains its people, reviews the output, carries the professional liability, and signs the return or advice.

So what exactly is the client paying for: time, judgment, or the result?

The answer depends on the billing model and whether the firm can show how AI was used and reviewed.

What the IRS guidance says

The IRS Office of Professional Responsibility published its introductory AI guidelines in June. The document applies existing Circular 230 duties to generative AI. It covers due diligence, competence, written advice, confidentiality, firm procedures, and fees.

On fees, the starting rule is not new. Circular 230 Section 10.27 says a practitioner may not charge an unconscionable fee in connection with a matter before the IRS.

The AI guidance goes further. It says billing for manual labor or time that was not actually spent, or double billing for AI-assisted tasks, may violate that rule depending on the facts. It also says firms should disclose relevant AI activity and fairly credit clients for cost reductions associated with AI use.

That is stronger language than many firms expected. The guidance does not provide a formula for calculating an AI credit or explain how the analysis works under a fixed-fee or value-pricing arrangement.

Why the AICPA wants clarification

The Journal of Accountancy reported that the AICPA is working with the IRS on clarifying language and frequently asked questions.

Its concern is that time saved on one task does not equal the firm’s total savings. AI products carry licensing and implementation costs. Firms spend time evaluating tools, developing procedures, training staff, and checking whether people follow the rules. They also remain responsible when an AI-assisted answer is wrong.

The AICPA also argues that many professional services are priced according to the value delivered rather than the minutes required. A useful tax-planning recommendation does not become less valuable because better technology helped the CPA reach it faster. That does not excuse fictional hours or double billing. Time-based and value-priced engagements are different arrangements and should be described honestly.

The billing model matters

An hourly firm has the clearest issue. If a professional spent 30 minutes using and reviewing an AI research tool, the time entry should reflect the work performed. Reusing an old two-hour estimate as though someone manually completed the research creates the exact concern raised by the IRS guidance.

A fixed-fee engagement works differently. The client agrees to a price for a defined service, such as preparing a return or completing a planning project. The fee does not usually rise or fall with every hour saved. The engagement letter should make that arrangement clear rather than presenting a fixed fee as a disguised number of hours.

Value pricing moves further from the clock. The fee reflects the scope, difficulty, risk, expertise, and benefit to the client. AI may improve the firm’s delivery cost, but the CPA still owns the analysis and the result.

Bundled services need the same clarity. The firm should be able to explain what the package covers and how the price was established without implying that the client paid for labor that never occurred.

Faster work still needs professional review

The fee discussion can distract from another part of the IRS guidance: AI output remains subject to the practitioner’s existing duties.

The guidelines say practitioners must verify facts, citations, and calculations before providing documents to a client or submitting them to the IRS. They must understand the technology well enough to recognize its limitations. Firms also need internal procedures for AI use, staff training, secure data handling, vendor review, and documentation.

A tool may produce a first draft in minutes, but a CPA still has to compare it with the client’s facts, check the authorities, review formulas, and decide whether the recommendation is sound.

That review is part of the professional service. It should appear in the firm’s workflow and, where appropriate, in its time records. “AI created the draft” does not explain who checked it or what that person did.

Keep records that support the fee

A firm does not need a separate technical log for every prompt. It does need enough documentation to show that its billing and review practices match the work.

For an AI-assisted engagement, the record may include:

The approved AI tool and task it supported
The professional who reviewed the output
The facts, calculations, and authorities that were checked
Any corrections made before delivery or filing
The billing method stated in the engagement letter
Any AI disclosure provided to the client

This connects the billing issue to the firm’s AI use policy. If staff use unapproved tools or nobody records the review step, management cannot confidently explain the fee, the data handling, or the quality control.

The engagement letter also deserves attention. If the firm uses fixed fees or value pricing, say so. If AI may assist with research, analysis, or drafting, describe that use in plain terms and state that a qualified professional reviews the work. Avoid promising that every use will reduce the invoice by a particular amount unless the firm has a process to calculate and apply that reduction.

Questions CPA firms should settle now

Before the IRS issues any clarification, firm leadership can answer a few practical questions:

Are time entries based on work actually performed?
Could AI-assisted work be billed twice through time and a separate technology charge?
Do fixed-fee and value-priced engagement letters accurately describe the arrangement?
Who decides when an AI-related cost reduction should reach the client?
What evidence shows that a qualified person reviewed the output?
Does the firm disclose AI use consistently enough to meet its policy and client commitments?

The IRS guidance is introductory, and the AICPA is asking for more precision. Firms can still clean up their own practices now.

AI can make tax work faster. The invoice should still tell the truth about how the firm charges, while the engagement record shows that professional judgment remained part of the service.

If your firm is adding AI to tax or advisory workflows, Artech can help document the tools, controls, and review steps behind responsible use.