Compliance
How to Benefit from the New IRS Automatic Penalty Relief Program
The IRS has introduced an Automatic Exemption from Penalty (AEP) program eliminating the need for many taxpayers to request relief under the First Time Abate system—here’s how to qualify and what you should do.
By NomadicTax Research Team • 5-8 min read • July 22, 2026
## What Is the Automatic Exemption from Penalty (AEP)?
The **IRS’s new AEP program**, announced in IR-2026-83 on **July 8, 2026**, replaces the old First Time Abate relief system for most taxpayers. It automatically grants penalty relief for routine filing and payment failures for those with a solid compliance history.([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
## Who Qualifies for AEP?
Taxpayers must meet all of the following:
- Have timely filed **original returns and paid any tax due** in the **three prior years** (or 12 consecutive quarters for quarterly filers).([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
- Have failures limited to non-filing, non-payment, or non-deposit penalties. Other penalty types (for egregious or unusual actions) are generally excluded.([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
- File returns for **tax years 2025 and 2026** and future periods (“original returns” meaning the initial timely filed return).([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
## What Falls Out When AEP Applies
If you qualify under AEP, the IRS will **automatically not assess** penalties related to failure to file, pay, or deposit for the applicable periods. That means no more formal request or paperwork to get these reliefs.([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
## Transition Timeline & First Time Abate Phase-Out
- AEP is expected to begin **Summer 2026**.([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
- The First Time Abate relief is being phased out, and on returns with **original due dates on or after January 1, 2027**, AEP replaces First Time Abate entirely.([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
- During transition, some taxpayers may still receive penalty notices and can still request First Time Abate if they believe they qualify. The IRS encourages checking eligibility.([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
## Practical Examples
| Scenario | Prior System | Under AEP |
|---|---|---|
| Taxpayer filed timely for 2022-2024, missed payment in 2025 | Must request relief under First Time Abate | Relief automatically applies if 2025 failure is eligible |
| Quarterly filer meeting obligations for 12 consecutive quarters but missed a payment in Q1-2026 | Submit a request | IRS grants relief automatically |
| Taxpayer filed late in earlier years | Not eligible; request relief only through reasonable cause | Must still request reasonable cause relief; AEP won’t apply |
## Actions You Should Take Now
- **Review your filing and payment history** for past three years (or twelve quarters). If clean, expect AEP if you have an eligible failure.
- **Maintain records** if you fall short; you may need to request relief under reasonable cause.
- For 2026 returns, plan around AEP’s full effect starting **January 1, 2027** for original returns.
- Consult with a tax professional if you have unusual returns (estate, gift, information returns), which may be excluded.
## Implications for Tax Planning & Compliance
- Encourages maintaining a clean compliance record. Past years’ behavior directly affects whether relief is automatic.
- Reduces administrative burden—stops at-request process for many routine penalty reliefs.
- Might shift behavior: taxpayers more likely to file even late rather than wait, knowing relief may automatically follow if otherwise compliant.
**Bottom line**: If you've been good about filing and paying, you no longer need to make the fuss of requesting First Time Abate; AEP helps reduce friction but verify eligibility—and mark January 1, 2027 as the full switch-over date.