The Shadow
WASHINGTON — The Internal Revenue Service today announced a new automatic process to provide penalty relief for taxpayers with a history of filing and paying on time, reducing the need for them to request assistance.
The new Automatic Exemption from Penalty will replace the long-standing First Time Abate administrative relief and is designed to simplify the process and reduce burden for those with a timely compliance history.
“Automatic Exemption from Penalty reflects the IRS’ commitment to making the payment of taxes owed simpler and more consistent,” said IRS Chief Executive Officer Frank J. Bisignano. “By automatically applying penalty relief, the IRS recognizes that taxpayers who historically pay on time should not have to make a formal request for relief that is routinely granted.”
New automatic penalty relief begins in summer 2026
The new Automatic Exemption from Penalty, or AEP, is a systemic administrative relief program expected to begin this summer. AEP applies to eligible original returns beginning with tax year 2025 and 2026 quarterly returns, as well as future tax periods. Taxpayers qualify if they have a history of timely filing the return and paying any tax due in the three prior years (or 12 consecutive quarters for quarterly returns). When taxpayers qualify, penalties are not assessed during processing for:
- Failure to file.
- Failure to pay.
- Failure to deposit.
Taxpayers do not need to take action to receive this relief. If eligible, the IRS will apply AEP and issue a notice confirming that the relief was granted.
Not all returns are eligible for AEP. For example, information returns and returns that are filed only in response to specific transactions or infrequent events (such as Form 706, U.S. Estate Tax Return or Form 709 Gift Tax Return) generally are not eligible.
First Time Abate phased out
First Time Abate has been the most common form of administrative penalty relief, allowing eligible taxpayers with a history of timely compliance to request the removal of certain penalties.
The IRS will begin phasing out First Time Abate and transitioning to AEP during the summer of 2026. During this transition, some qualifying taxpayers may still receive penalty notices for eligible tax year 2025 and 2026 quarterly returns. Taxpayers who believe they qualify may contact the IRS to request First Time Abate.
AEP provides relief automatically and will replace First Time Abate for eligible returns with original due dates on or after Jan. 1, 2027. Please visit Administrative penalty relief for more information.
What to expect
Taxpayers who do not qualify for AEP may still request penalty relief based on reasonable cause. The IRS will review those requests and notify taxpayers of the outcome. See Penalty relief for reasonable cause for more information.
While AEP prevents the assessment of certain penalties, taxpayers must still pay any tax and interest due, as well as any penalties not eligible for relief.
Supporting fairness and voluntary compliance
The IRS is making this change to promote fairness and consistency in the application of penalty relief while encouraging voluntary compliance.
By automatically recognizing taxpayers with a strong compliance history, AEP reduces taxpayer burden and ensures penalty relief is applied fairly and equitably to all taxpayers, thereby observing their Taxpayer Rights.
For more information about penalty relief eligibility and requirements, visit IRS.gov.
