Issue Number: Tax Tip 2026-59Eligible taxpayers may receive automatic penalty relief
Taxpayers with a history of filing and paying on time may now have an easier path to receive penalty relief. This summer, the IRS’s new Automatic Exemption from Penalty or AEP will replace the long-standing First Time Abate administrative relief. AEP is designed to eliminate the need to contact the IRS to request relief and reduce burden for those with a timely compliance history. Eligibility
AEP applies to eligible original returns beginning with tax year 2025 and 2026 quarterly returns and future tax periods. Taxpayers qualify if they have a history of filing on time and paying any tax due in the previous 3 years (or 12 consecutive quarters for quarterly returns).
When eligible, penalties are not assessed during processing for:
- Failure to file
- Failure to pay
- Failure to deposit
Eligible taxpayers do not need to take action to receive this relief. If the IRS applies AEP, the taxpayer will receive a notice that the relief was granted. Not all returns are eligible for AEP. Some returns like ones 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. As First Time Abate phases out and transitions to AEP, 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 during this transition. AEP 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. Other penalty relief options
Taxpayers who do not qualify for AEP may still request penalty relief based on reasonable cause and they will be notified 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. More information
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