What Is Changing
As of summer 2026, the IRS is replacing the longstanding First Time Abate program with a new process called the Automatic Exemption from Penalty (AEP). (irs.gov) Under AEP, taxpayers with a strong history of filing on time—and paying their due taxes—will automatically have penalties waived for certain failures.
Who Qualifies for AEP
To receive automatic relief, you must have:
- A history of timely filing and paying in the past 3 years (or the last 12 quarters for quarterly returns). (irs.gov)
- Be submitting original returns for tax year 2025 or 2026, quarterly returns for those years, or any future tax periods. AEP takes effect for eligible returns due Jan 1, 2027 and later. (irs.gov)
- Classic errors like failure to file, failure to pay, or failure to deposit are eligible. Other sorts of penalties or taxpayer requests still follow different rules.
Implications for Taxpayers
Advantages
- No need to request First Time Abate—relief is automatic if you meet the eligibility criteria. Saves time and hassle.
- Penalties are avoided before they're assessed, not just removed after notice.
Requirements
- You still owe taxes and interest—these won’t be waived by AEP.
- Some returns or filings aren't eligible, including irregular or one-off event-based filings like estate tax or gift tax returns. (irs.gov)
Action Steps
- Review your tax compliance history for 2023–2025 (or last 12 quarters) to ensure consistency in filing and payment.
- For complex returns or late payments, still maintain documentation to support “reasonable cause” in case AEP is not granted.
- If you thought you qualified under First Time Abate, but deadlines are tight, verify if AEP applies before making requests.
- Plan ahead for your 2026 and beyond filings, since AEP becomes the normal route, replacing First Time Abate.
Case Example
Emily, an independent contractor, filed and paid her tax obligations on time in 2023, 2024, and 2025. In Q1 of 2026, she missed a quarterly payment. Under AEP (spring 2026 onward), that missed deposit penalty won’t be assessed—provided all other eligibility criteria are met. Under the old system, she would have had to request relief via First Time Abate.
Bottom Line
The IRS’s Automatic Exemption from Penalty (AEP) is great news if you're a reliable taxpayer: consequences like failure to file or pay can now be eliminated automatically, without needing to apply.
If uncertain about your eligibility, consult IRS guidance or a tax professional—events or non-standard filings can affect qualification for AEP. There's no time like now to make sure you have clean records for 2023-2025.