Synvestable Team
August 5, 2026
14-slide resource
For tax planners
The Obligations Are the Work
Most firms approach AI in tax practice as a technology question: which model, hosted where, at what cost. The compliance question underneath it is narrower than the debate suggests and broader than most firms plan for. Three regimes are in play the moment a return touches a model: IRC §7216, the FTC Safeguards Rule, and Circular 230, plus state breach notification law. Choosing where the model runs changes exactly one of them.
This guide is the practitioner's version of that answer: the firm-level foundations, the path-specific additions, and the per-engagement sequence, in the order they have to happen. It is written for the person who signs the return, not for a procurement committee.
The Common Misread
Running a local model does not make you compliant. An open-weight model on your own hardware removes the §7216 disclosure consent, because no disclosure occurs, and it removes the vendor oversight duty that attaches to a service provider. Everything else is unchanged, and some of it gets materially harder, because the security stack a hosted provider was carrying is now yours.
| Obligation | Cloud / hosted model | Local / self-hosted model |
|---|---|---|
| §7216 disclosure consent | Required, because data leaves the firm | Not required, no disclosure occurs |
| §7216 use consent | Required | Still required |
| FTC Safeguards Rule | Required, plus vendor oversight | Required, and you own the whole stack |
| Circular 230 | Identical | Identical |
| State breach notification law | Identical | Identical |
What's Inside the Guide
The full resource walks all three layers item by item, with the governing citation on each one. Here is the structure, and a sample of what each layer covers.
Firm Level: Both Paths
13 requirements · done once- Written Information Security Plan with the AI workflow in scope (Pub. 4557 / Pub. 5708)
- Designate a Qualified Individual under §314.4(a)
- Updated risk assessment under §314.4(b)
- Access controls, encryption and audit logging
- Incident response plan and the 30-day FTC notice trigger
- Annual written report, ongoing testing, staff training
- Engagement letter, AI use policy, consent templates
- Carrier notification and a retention/disposal schedule
Your Deployment Path
5 more items · either path- Cloud: written provider contract under §314.4(f)
- Cloud: zero data retention and no training on inputs, confirmed in writing
- Pinning inference to the United States, and why §301.7216-3(b) makes it matter
- Vendor due diligence file: SOC 2 Type II, DPA, subprocessor list
- Local: commercial-use licence clearance for the open weights
- Weight integrity, hardening, physical security and backup
- The elevated review standard quantized models demand
Per Client, Every Engagement
10 steps · in order- Signed engagement letter covering the advisory scope
- §7216 use consent, signed and dated before the analysis runs
- §7216 disclosure consent on the cloud path, before transmission
- Confirming the consent is still live
- Input minimization and redaction practice
- The §10.37 preparer review gate
- Delivery caveats and what to retain
Consent Mechanics
Of everything in this resource, consent mechanics generate the most avoidable exposure, because the failures are procedural rather than substantive. Four rules account for most of them.
Two consents, two documents
A use consent and a disclosure consent cannot share a single form. Combining them invalidates both.
Signed before, never after
Executed before the analysis runs and, on the cloud path, before any data is transmitted. A consent obtained afterward does not cure the transmission.
Consents expire
If the form states no duration, it lapses one year from signature. Firms need to track signature dates, not just collect them.
You cannot require it
Treas. Reg. §301.7216-3(a)(1) bars conditioning the provision of preparation services on consent. A client can decline and still be your client, so any workflow you build needs a manual fallback path, not a dead end.
What None of This Discharges
Two duties survive every consent, contract and control in this guide. They stay with the person who signs.
Circular 230 §10.35: Competence
You must have the knowledge, skill, thoroughness and preparation appropriate for the matter. A tool does not supply competence you do not have.
Circular 230 §10.37: Written Advice
§10.37 permits reliance on the advice of another person, under conditions. A model is not another person.
Whoever signs the deliverable owns every number in it.
Additional Layers
For CPA Firms
- AICPA Rule 1.700.001 runs in parallel on the cloud path, requiring either client consent or a written confidentiality agreement with the provider
- The SSTSs revised effective January 2024 added general standards on data protection and on reliance on tools
- Rev. Proc. 2013-14's prescribed consent format is written for the 1040 series, so a book of 1120-S and 1065 filers lands differently
For Software Builders
- The consent screen is two forms, not one, and disclosure consent appears only when the configured backend is remote
- Deployment mode is a configuration switch, not a rebuild, so one product serves both paths
- A declined consent needs a route, so build the manual path
- The review gate lives in the product: sign-off is a step the software enforces, not a habit it hopes for