IRS says automatic penalty relief will begin in summer 2026 for eligible timely filers

Loudoun Forward section: Policy & Risk
Word count: 305

The Internal Revenue Service announced a new automatic process for granting certain penalty relief to taxpayers with a history of filing and paying on time. The Automatic Exemption from Penalty program, known as AEP, is expected to begin during summer 2026.

AEP will replace the IRS’s long-standing First Time Abate administrative relief for eligible returns with original due dates on or after January 1, 2027. The IRS says the new process is intended to reduce the need for qualifying taxpayers to request relief manually.

The program applies to eligible original returns beginning with tax year 2025, to 2026 quarterly returns and to future periods. A taxpayer generally must have filed the relevant return and paid the tax due on time during the previous three years. For quarterly returns, the IRS uses a history of 12 consecutive quarters.

When a taxpayer qualifies, the IRS says certain failure-to-file, failure-to-pay and failure-to-deposit penalties will not be assessed during processing. The taxpayer does not need to submit a separate request for AEP. The IRS will apply the relief automatically and issue a notice confirming it.

Not every return qualifies. The agency identifies information returns and returns filed only for particular transactions or infrequent events, including certain estate and gift-tax returns, as examples that generally are not eligible.

The transition from First Time Abate will occur during summer 2026. The IRS says some qualifying taxpayers may still receive penalty notices involving eligible 2025 tax-year or 2026 quarterly returns during the transition. Those taxpayers may need to contact the agency to request First Time Abate.

AEP does not eliminate the underlying tax or interest, and it does not remove penalties outside the program. Businesses should maintain filing and payment records, review the official eligibility rules and wait for the IRS notice before assuming relief has been granted for a particular return.

Verified reference sources

• Internal Revenue Service — Automatic Exemption from Penalty Announcement
• Internal Revenue Service — Administrative Penalty Relief

Sources verified July 22, 2026.