IRS changes penalty rules: some taxpayers will no longer have to request this relief

The Internal Revenue Service (IRS) has introduced a new system that will automatically provide certain taxpayers with penalty relief if they have a history of timely tax compliance. Eligible taxpayers will no longer need to contact the agency to request this relief.

The Automatic Exemption from Penalty (AEP) began in summer 2026 and is replacing the long-standing First Time Abate process for eligible returns. The change is designed to make penalty relief easier to receive for taxpayers who generally comply with their tax obligations.

Who can qualify for automatic penalty relief?

To qualify, taxpayers generally must have filed their returns on time and paid any tax due during the previous three years. For quarterly filers, the requirement is 12 consecutive quarters of timely compliance.

AEP can prevent certain penalties from being assessed, including failure to file, failure to pay, and failure to deposit penalties. The program applies to eligible original returns beginning with tax year 2025 and to 2026 quarterly returns and subsequent periods.

Taxpayers do not have to request the relief

Eligible taxpayers do not need to submit a form or contact the IRS to receive AEP. When the requirements are met, the agency applies the relief during the processing of the original return and sends a notice explaining that the penalty was not assessed.

The program does not eliminate the obligation to file returns or pay taxes. Taxpayers who do not qualify for AEP may still be able to request other forms of penalty relief, such as relief based on reasonable cause.