Understanding New AICPA SSTS Section 1.4: What CPAs Need to Know

Every time a new standard or technology hits the CPA industry, it has the power to reshape tax workflows, data governance, and professional responsibilities. 

The revised Statements of Standards for Tax Services (SSTS) Section 1.4, issued by the AICPA, is one of the most impactful updates in recent years, especially as firms increasingly rely on automated tools, cloud platforms, and AI-enhanced systems. 

In this article, we break down: 

• What SSTS Section 1.4 requires
• What constitutes a "tool"
• How the standard impacts daily operations
• How firms can reasonably rely on automated systems without compromising compliance

What Is SSTS Section 1.4?

SSTS Section 1.4. part of the newly revised SSTS No. 1, provides guidance on a CPA’s responsibilities when using tools or technologies that automate or support tax compliance and advisory work.

The standard emphasizes that while technology can streamline tax processes, the CPA remains professionally responsible for the outputs used in tax returns or advice. In other words: tools can assist, but they cannot replace a CPA’s obligation to exercise professional judgment, maintain data accuracy, or verify results.

At its core, Section 1.4 focuses on three areas:

1. Understanding the tool and its purpose
2. Evaluating whether reliance on the tool is reasonable
3. Applying professional judgment to review results before using them in tax compliance or planning

What Is a “Tool” Under SSTS Section 1.4?

The term tool is intentionally broad to reflect the range of technologies modern CPA firms use. Under SSTS Section 1.4, a tool includes any system, application, or automated process used to gather data, perform calculations, analyze information, or generate tax-related output.

Examples include:

• Tax preparation software
• Cloud-based document management systems
• Workflow automation tools
• AI-powered document extraction or classification systems
• Data transformation utilities (e.g., Excel macros, ETL scripts)
• Client portals and online questionnaires
• Third-party payroll or bookkeeping applications that feed data into the tax process

Importantly, a “tool” does not need to be an AI system. Even basic tools, such as automated depreciation calculators or bank feed imports, qualify. The standard applies regardless of whether the technology is simple, complex, vendor-provided, or built internally.

Key Responsibilities Under SSTS 1.4

Although tools can dramatically improve efficiency, SSTS 1.4 reaffirms that CPAs must maintain oversight and control. The standard outlines several key responsibilities:

1. Understanding the Tool’s Intended Use

CPAs must understand what the tool does, its limitations, and the nature of the source data it relies on. This includes being aware of underlying assumptions and any known risk factors.

2. Assessing Whether Reliance Is Reasonable

Relying on a tool is acceptable only if a CPA determines that the tool is appropriate for the engagement and the circumstances. Blind reliance is not permitted.

Factors to consider include:

• • The tool’s reliability track record
  • Quality and completeness of input data
  • Vendor documentation and transparency
  • The risk that the output could be incomplete or misleading

3. Reviewing Output with Professional Judgment

Before using the tool’s results in tax filings or client advice, CPAs must review the output for accuracy, reasonableness, and consistency with known facts.

4. Documenting Considerations and Conclusions

While SSTS doesn’t mandate specific documentation procedures, firms should maintain internal records of their reliance decisions, especially for complex or high-risk processes.

Real-Life Examples of Reasonable Reliance (SSTS 1.4.3)

To help firms understand how Section 1.4 applies in practice, here are real-world examples we commonly see when advising CPA firms on IT systems and workflow optimization.

Example 1: Relying on Tax Prep Software for Standard Calculations

A CPA uses a well-established tax preparation platform (e.g., UltraTax, CCH Axcess, or ProConnect) to calculate depreciation. The CPA:

• Verifies asset data entered
• Confirms the correct method and recovery period
• Reviews the final depreciation schedules for accuracy

Why this is reasonable: The software is reputable, designed for the purpose, and the CPA validates the key assumptions.

Example 2: Using a Client Portal That Automatically Imports Organizers

A firm uses a secure cloud portal that extracts client responses and uploads them into the tax software. The CPA:

• Reviews the imported information
• Confirms outliers or missing entries
• Contacts the client if values appear inconsistent

Why this is reasonable: The tool automates data transfer, but the CPA still reviews and evaluates the output.

Example 3: Relying on Payroll Provider Reports

A client’s payroll service (e.g., ADP, Gusto, Paychex) provides year-end payroll summaries. The CPA:

• Checks totals against previous year data and expected trends
• Reviews any anomalies or unexpected adjustments
• Confirms reasonableness with the client when necessary

Why this is reasonable: Payroll providers are specialized systems, and the CPA performs appropriate verification steps.

Example 4: Using AI-Based Document Extraction

A firm uses AI to extract 1099 data from scanned documents. The CPA:

• Reviews extracted fields
• Ensures no documents were skipped
• Confirms accuracy against the original 1099s

Why this is reasonable: The CPA understands that AI extraction may have errors and performs a proper review before reliance.

How PK Tech Supports Compliance with SSTS 1.4

As a managed IT partner for CPA firms, we help ensure that the technology you rely on meets compliance expectations.

Our services support SSTS 1.4 adherence in several ways:

• Tool evaluations and vendor due diligence
• Implementation of secure, auditable workflows
• Automation reviews to confirm appropriate controls
• Data validation processes to reduce risk
• Training on responsible use of AI and automated tools

A well-designed IT environment not only enhances efficiency but also strengthens your firm’s ability to reasonably rely on tools while maintaining compliance.

Is Your CPA Firm in Compliance With SSTS 1.4? 

SSTS Section 1.4 formalizes what most CPAs have always known: technology can make tax work faster and more accurate, but it doesn’t replace professional judgment. By understanding what tools do, evaluating their reliability, and reviewing their output with care, firms can confidently integrate automation while staying compliant.

As CPA firms continue to scale services and adopt more advanced technologies, aligning IT practices with SSTS Section 1.4 isn’t just recommended, it’s absolutely essential. CPA firms that are attempting to do this without the help of qualified IT professionals, in most cases, are not achieving compliance at all.

Our team at PK Tech is here to help ensure your systems, processes, and automations support both your productivity and your professional standards. Schedule a complimentary consultation with one of our IT experts here.