Tips for Taxpayers Who May Qualify for Automatic Penalty Relief

By snapme | August 21, 2026 |

Tips for Taxpayers Who May Qualify for Automatic Penalty Relief

In July 2026, the IRS began to phase in the Automatic Exemption from Penalty (AEP) program. This program automatically provides penalty relief to eligible taxpayers with a history of timely filing and payment compliance. AEP will fully replace the First Time Abate (FTA) program for eligible original returns with due dates on or after January 1, 2027.

Under the FTA program, taxpayers generally had to contact the IRS to request relief from certain penalties. Under AEP, eligible taxpayers will not need to call or write the IRS to request relief. Instead, the IRS will automatically identify eligible taxpayers and prevent certain penalties from being assessed.

When AEP applies, the IRS will send taxpayers a notice explaining that a penalty was not assessed because of their timely compliance history. Taxpayers who receive this notice generally do not need to contact the IRS or respond to the notice.

Penalties Covered by AEP

For eligible individual taxpayers, AEP may prevent the IRS from assessing:

Failure-to-file penalties; and

Failure-to-pay penalties.

For eligible business taxpayers, AEP may prevent the IRS from assessing:

Failure-to-file penalties;

Failure-to-pay penalties; and

Failure-to-deposit penalties.

Who May Qualify for AEP

Generally, you qualify for AEP if they you have a timely compliance history. This usually means they you timely filed required returns and paid any tax due for the prior three years.

For quarterly filers, taxpayers you generally must have a timely compliance history for the prior 12 consecutive quarters.

Not all returns or penalties qualify for AEP. For example, returns filed for specific transactions or infrequent events, such as Form 706, US Estate Tax Return, and Form 709, US Gift and Tax Return, generally are not eligible.

AEP provides relief only from eligible penalties. It does not eliminate an taxpayer’s obligation to pay the underlying tax, interest, or penalties that are not eligible for AEP.

What to Do After Receiving a Penalty Notice

Taxpayers You should not ignore an IRS notice assessing a failure-to-file, failure-to-pay, or failure-to-deposit penalty. If a you receives a penalty notice and does not receive a separate notice explaining that AEP was applied, the taxpayer should review the notice carefully.

If you the taxpayer believes the penalty is wrong or that they you qualify for relief, they you should call the IRS at the toll-free number listed on the your notice and request penalty relief.

This is especially important during the transition to AEP. Some taxpayers with eligible 2025 tax year returns or 2026 quarterly returns may still receive penalty notices if their returns were processed before AEP was available. In these cases, you may qualify for FTA, reasonable cause, or some other type of penalty relief, depending on the facts and circumstances.

Have the following information available when you call:

The IRS notice or letter;

The penalty you want relieved, such as failure-to-file, failure-to-pay, or failure-to-deposit;

The tax year or tax period;

The reason you believe the penalty should be removed or other types of relief applied (e.g., you believe you qualify for FTA or AEP because you have a compliant filing history, or your unique facts and circumstances support reasonable cause relief); and