Automatic Exemption From Penalty Program Begins Transition in Summer 2026
(UCBJ) – The Internal Revenue Service has announced a new automatic process that will provide penalty relief for taxpayers with a history of filing and paying on time, eliminating the need for many taxpayers to request relief. The new Automatic Exemption from Penalty (AEP) program will replace the IRS’ First Time Abate administrative relief program and will automatically apply eligible penalty relief for certain taxpayers with a strong compliance history.
The program is expected to begin this summer and will apply to eligible original returns for tax years 2025 and 2026, as well as to quarterly returns and future tax periods.
Taxpayers may qualify if they have filed returns and paid taxes on time during the previous three years or 12 consecutive quarters for quarterly returns. Eligible taxpayers will receive automatic relief from penalties related to:
- Failure to file
- Failure to pay
- Failure to deposit
The IRS said taxpayers do not need to take action to receive the relief. Eligible taxpayers will receive a notice confirming the exemption.
The IRS will begin phasing out the First-Time Abate program during the transition. Some taxpayers may still receive penalty notices during the changeover and can contact the IRS if they believe they qualify for relief.
Taxpayers who do not qualify for AEP may still request penalty relief based on reasonable cause. The IRS noted that taxpayers remain responsible for paying taxes, interest and any penalties not covered by the new program. The IRS said the new process is designed to make penalty relief more consistent while reducing administrative burdens for taxpayers with a history of compliance.
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