What’s Changing with Penalty Relief
The IRS has introduced the Automatic Exemption from Penalty (AEP), effective summer 2026, replacing the First Time Abate relief program. Under AEP, if you’ve filed and paid your taxes on time over the past three years (or 12 consecutive quarters for quarterly filers), certain penalties will be waived without you having to apply. (irs.gov)
Types of Penalties Covered
AEP will automatically relieve:
- Failure-to-file penalties
- Failure-to-pay penalties
- Failure-to-deposit penalties
Note: This doesn’t erase interest or other penalties not covered by AEP. (irs.gov)
Who Qualifies (and Who Doesn’t)
| Requirement | Detail |
|---|---|
| Compliance history | Filed & paid on time the last 3 years (or 12 quarters) |
| Eligible returns | Original returns for 2025 & 2026, future ones; quarterly returns similarly |
| Not eligible | Info returns, estate/gift returns (Forms 706, 709), or infrequent event-based returns |
Action Steps for Taxpayers
- Check your filing/payment history: If you've consistently complied over recent years, expect AEP to help.
- No action needed: If eligible, relief is automatic—you’ll receive a confirmation notice.
- For those not yet eligible, the “reasonable cause” standard remains available.
Practical Example
Jane has submitted all her tax returns and paid all tax bills on time from 2022–2025. In Q2 2026, she misses one deposit due on her self-employed income. Under AEP, if she meets the 12-quarter requirement, that failure-to-deposit penalty won’t be applied—provided all other criteria are met.
Takeaway
For taxpayers with a solid track record, AEP reduces anxiety and administrative burden. Rather than filling forms or making requests, the relief comes without extra work. Even if not immediately eligible, knowing this shift can influence how you prioritize timely filings and payments moving forward. Any uncertainty? Consult a tax professional to verify eligibility.