Michael Coverstone wrote an article for AICPA’s The Tax Adviser that examines how developments in artificial intelligence, evolving interpretations of Section 7525, and heightened IRS interest in practitioner workpapers may impact privilege protections in tax practice.
This article explores the privilege exposure faced by CPAs using generative AI; analyzes the significance of the first federal decision directly addressing AI–related privilege questions, Heppner; and provides practitioners with immediate planning recommendations.
As Michael explains, “Three developments in tax practice are converging that present challenges in protecting the confidentiality of communications between taxpayers and tax practitioners.”
In the article, Michael explains that the district court’s decision in Heppner, if followed by other courts, would leave CPA–controlled AI work structurally exposed under Sec. 7525 and that prudent practice now requires three correlated responses: routing privilege–sensitive AI work through a Kovel–mediated architecture, imposing operational discipline at the AI prompt and verification layers, and adopting four engagement–letter provisions. The full article can be found here.
About Michael
Michael has represented taxpayers in numerous IRS audits, administrative appeals, collection matters, and litigation before the United States Tax Courts. His Tax Court experience includes a range of tax disputes, from smaller substantiation cases to complex partnership matters involving real estate investments and syndications.