Compliance
IRS Introduces Automatic Penalty Relief Program: Say Goodbye to First Time Abate
Starting mid-2026, the IRS rolled out a new automatic penalty-relief program for qualifying taxpayers—making penalty abatement simpler and more consistent.
By NomadicTax Research Team • 5-8 min read • September 15, 2026
## What’s Changing: Automatic Exemption from Penalty (AEP)
The IRS has replaced its First Time Abate program with the **Automatic Exemption from Penalty (AEP)**, effective Summer 2026. ([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai)) Now, taxpayers with a history of timely filing and paying (over the prior three tax years or twelve consecutive quarterly returns) will receive penalty relief **automatically**, without having to request it. ([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
Eligible relief includes penalties for:
- Failure to file returns on time
- Failure to pay due taxes
- Failure to make required tax deposits (e.g., payroll/federal taxes) on time. ([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
## Who Qualifies?
To qualify:
- You must have **no penalties** or **delinquencies** of type above over the relevant period (3 prior years or 12 prior quarters).
- Applies to original returns starting in **tax year 2025**, as well as quarterly tax periods into 2026 and beyond. ([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
Some returns are **not eligible**, including:
- Information returns
- Returns filed only in response to infrequent vs. routine events (e.g. gift tax returns, estate tax returns). ([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
## Implications & Practical Advice
- **No action needed**: If eligible, the IRS will apply the relief automatically and issue a confirmation. ([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
- **Estimate your eligibility** ahead of filing**: ensure your previous years were clean—this pays off.
- **Plan ahead for due dates**: remember that eligible returns include quarterly periods—if you are self-employed or have sizeable withholding, consistency matters.
## Example Scenario
Jane, a freelance designer, filed all her returns for 2022–2024 on time, paid taxes due and made timely estimated tax payments for those years and all 12 quarters. In 2026, she realizes she underpaid estimated taxes for Q1, resulting in a penalty. Under AEP, that penalty is **automatically exempted** due to her clean prior record—no need to file any abatement request.
## Transition from First Time Abate
The First Time Abate program is being **phased out** during Summer 2026. It required proactive filing of requests; now, AEP represents a shift to system-driven fairness. ([irs.gov](https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers?utm_source=openai))
## Why This Matters
- Simplifies compliance for long-term responsible taxpayers.
- Reduces administrative burden both for taxpayers and for the IRS.
- Potentially encourages more timely filings and payments.
Takeaway: Check your prior compliance history—if you’ve been consistent with filings and payments, expect penalties to be **automatically cleared** under AEP beginning Summer 2026.