The Internal Revenue Service (IRS) is introducing a new program that will automatically waive certain tax penalties for taxpayers with a consistent history of filing and paying taxes on time, eliminating the need for eligible taxpayers to request relief.
The new Automatic Exemption from Penalty (AEP) program will begin rolling out this summer and will gradually replace the agency’s long-standing First Time Abate (FTA) administrative relief program.
According to the IRS, AEP is designed to simplify tax administration, reduce paperwork, and reward taxpayers who have demonstrated a strong record of voluntary compliance.
Under the new policy, eligible taxpayers will automatically receive relief from penalties related to:
- Failure to file tax returns on time,
- Failure to pay taxes owed on time, and
- Failure to make required tax deposits.
Taxpayers do not need to submit an application or contact the IRS. If they qualify, the agency will automatically apply the relief during return processing and send a notice confirming that the penalties were waived.
To qualify, taxpayers must have timely filed all required returns and paid any taxes due for the previous three years. Quarterly filers, such as many businesses, must have maintained compliance for the previous 12 consecutive quarters.
The IRS said the new system will first apply to eligible original returns for tax year 2025 and quarterly tax returns filed during 2026, with future tax periods also covered.
Not every tax return is eligible for automatic relief. The program generally applies to standard individual and business income tax returns but excludes certain specialized filings, including information returns and returns filed only for specific transactions, such as Form 706 (U.S. Estate Tax Return) and Form 709 (Gift Tax Return).
The AEP program replaces the current FTA process, under which eligible taxpayers had to contact the IRS and request that penalties be removed. Although many requests were routinely approved, taxpayers often missed out simply because they were unaware of the program or failed to apply.
The IRS acknowledged that processing thousands of FTA requests each year also created a significant administrative burden for the agency. By automating the process, officials expect to reduce delays while ensuring that qualifying taxpayers receive relief consistently.
During the transition period beginning this summer, some eligible taxpayers filing 2025 returns or 2026 quarterly returns may still receive penalty notices under the existing system. Those taxpayers may continue to request relief through the First Time Abate process until AEP becomes fully operational.
Beginning with returns whose original due dates fall on or after January 1, 2027, AEP will completely replace the First Time Abate program for eligible returns.
Taxpayers who do not qualify for AEP will still be able to request penalty relief based on reasonable cause, such as serious illness, natural disasters, or other circumstances beyond their control. The IRS will continue reviewing those requests individually.
The agency emphasized that AEP waives only eligible penalties. Taxpayers remain responsible for paying any taxes owed, accrued interest, and penalties that are not covered under the new program.
IRS Chief Executive Officer Frank J. Bisignano said the change reflects the agency’s commitment to making tax administration simpler and more consistent.
“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,” Bisignano said.
The IRS said the new initiative promotes fairness, encourages voluntary compliance, and reduces unnecessary burdens for both taxpayers and the agency.
