The Internal Revenue Service (IRS) has announced a new Automatic Exemption from Penalty (AEP) process, designed to simplify penalty relief for taxpayers with a consistent history of timely filing and payment. This new system, which begins in summer 2026, aims to reduce the need for eligible taxpayers to formally request assistance.
Automatic Exemption from Penalty will replace the long-standing First Time Abate administrative relief. It applies to eligible original returns starting with tax year 2025 and 2026 quarterly returns, as well as future tax periods. Taxpayers qualify if they have a history of timely filing and paying tax due in the three prior years or 12 consecutive quarters for quarterly returns. When qualified, penalties for failure to file, failure to pay, and failure to deposit will not be assessed during processing.
IRS Chief Executive Officer Frank J. Bisignano said, “Automatic Exemption from Penalty reflects the IRS’ commitment to making the payment of taxes owed simpler and more consistent.” He added that this automatic relief recognizes compliant taxpayers should not need to request relief routinely granted.
During the transition period in summer 2026, some taxpayers may still receive penalty notices for eligible tax year 2025 and 2026 quarterly returns and may contact the IRS to request First Time Abate. AEP will fully replace First Time Abate for eligible returns with original due dates on or after January 1, 2027. While AEP prevents certain penalty assessments, taxpayers must still pay any tax and interest due, along with any penalties not eligible for relief. Taxpayers not qualifying for AEP can still request relief based on reasonable cause.