Engagement-Letter AI Clause, TEMPLATE

What this is. Drop-in language disclosing that your firm uses vetted technology and third-party service providers (including AI) in performing services. This satisfies the AICPA inform-the- client expectation (ET §1.150.040) and supports the confidentiality interpretation (ET §1.700.040).

What this is NOT. It is not a §7216 consent. A general "we may use AI" clause does not meet the format/content rules of Treas. Reg. §301.7216-3 / Rev. Proc. 2013-14 for a 1040-series client. Where an AI use falls outside a §301.7216-2 exception, obtain the separate §7216 consent before the disclosure. Use the ai-use-checker to tell which lane you're in. Replace every [BRACKET]; have counsel review. Not legal advice.

Clause A, Technology & service-provider disclosure (all clients)

Use of Technology and Service Providers. In performing the services under this engagement, [FIRM NAME] uses professional software and may use third-party service providers and technology tools, including artificial-intelligence tools, to assist with tasks such as document handling, data extraction, organization, and drafting. We select providers we believe are capable of maintaining appropriate security, require them by contract to protect confidential information, and remain responsible for the work product. We do not use such tools in a manner that substitutes for our professional judgment, and a [FIRM NAME] professional reviews the results. We protect your information consistent with our Written Information Security Plan and applicable law.

Why it's worded this way: tracks AICPA ET §1.150.040 (notify) + §1.700.040 (confidentiality/contract), SSTS §1.4 (reviewer of record), and the FTC Safeguards Rule (service-provider oversight).

Clause B, §7216 pointer (tax-prep engagements)

Confidentiality of Tax Return Information. Federal law (IRC §7216) restricts how we may use or disclose your tax return information. We will not disclose or use your tax return information for any purpose other than preparing your return unless permitted by law or authorized by your separate written consent. Where a tool or provider would require your consent, we will obtain a compliant written consent from you before any such disclosure or use.

⚠️ Drafting note (do not delete until resolved): For non-1040 clients, a §7216 consent may be embedded in the engagement letter only if it independently satisfies every element of Treas. Reg. §301.7216-3(a)(3)(i) (purpose, specific recipient, data, signature/date, mandatory language). For 1040-series clients, use a separate Rev. Proc. 2013-14-compliant consent, > do not rely on this clause as the consent. See §7216 Consent template.

Clause C, Optional: client AI-use tier opt-in

(Use if you offer clients a choice of AI-use levels, a pattern at least one AI Lab member is already running. Pair the chosen tier with matching §7216 consent language.)

AI-Use Preference. You may choose the level of AI assistance applied to your engagement: ☐ Standard, vetted tools for clerical support only (extraction, organization, drafting). ☐ Enhanced, also permits [describe], subject to the separate §7216 consent attached. ☐ None, no third-party AI tools applied to your identifiable information. Absent a selection, the Standard level applies.

Cross-references: Regulatory Foundation §1 (§7216), §3 (AICPA ET). Educational template, counsel review required before use.