Guidance for Taxpayers Who May Be Eligible for Automatic Penalty Relief

The IRS is introducing the Automatic Exemption from Penalty (AEP) program in stages. The new process automatically grants penalty relief to qualifying taxpayers who have a record of filing and paying on time. Once fully in place, AEP will take the place of the First Time Abate (FTA) program for eligible original returns with due dates on or after January 1, 2027.

Under the older FTA process, taxpayers typically had to contact the IRS to ask for relief from certain penalties. With AEP, eligible taxpayers will not need to call or write the IRS to request it. Instead, the agency will identify qualifying taxpayers on its own and stop certain penalties from being assessed.

When AEP is applied, the IRS sends a notice explaining that a penalty was not charged because of the taxpayer’s history of timely compliance. In most cases, recipients of that notice do not need to take any further action.

Penalties AEP May Cover

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

• Failure-to-file penalties; and
• Failure-to-pay penalties.

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

• Failure-to-file penalties;
• Failure-to-pay penalties; and
• Failure-to-deposit penalties.

Who Can Qualify for AEP

In general, you may qualify for AEP if you have a timely compliance history. That usually means filing required returns on time and paying any tax due during the prior three years.

For quarterly filers, the requirement is usually a timely compliance history for the previous 12 consecutive quarters.

Not every return or penalty is eligible. For instance, returns tied to specific transactions or occasional events, such as Form 706, US Estate Tax Return, and Form 709, US Gift and Tax Return, generally are not eligible.

AEP only removes eligible penalties. It does not cancel the underlying tax bill, interest, or any penalties that do not qualify for AEP.

What to Do If You Get a Penalty Notice

Do not ignore an IRS notice that assesses a failure-to-file, failure-to-pay, or failure-to-deposit penalty. If you receive a notice and do not also receive a separate notice saying AEP was applied, read the notice closely.

If you think the penalty is incorrect or that you qualify for relief, call the IRS using the toll-free number shown on the notice and ask for 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 those situations, you may still qualify for FTA, reasonable cause, or another form of penalty relief, depending on the facts.

When you call, be ready with the following information:

• The IRS notice or letter;
• The penalty you want removed, 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 another type of relief should apply, such as a compliant filing history supporting FTA or AEP, or facts that support reasonable cause relief; and
• If you are asking for reasonable cause relief, any documents that support your request.