The Internal Revenue Service is replacing its long-standing First Time Abate (FTA) program with a new system called Automatic Exemption from Penalty (AEP), making it easier for taxpayers with a strong compliance history to receive penalty relief. Announced on July 8, the new process is designed to automatically remove certain penalties for eligible taxpayers instead of requiring them to contact the IRS and request relief. IRS officials say the change will reduce paperwork, simplify tax administration, and help ensure qualifying taxpayers receive relief they may have previously missed. The agency expects the AEP program to begin rolling out during summer 2026, with a full transition for eligible returns due on or after January 1, 2027.
Who Qualifies for Automatic Relief?
To qualify for Automatic Exemption from Penalty, taxpayers generally must have a clean compliance history during the previous three tax years (or 12 consecutive quarters for quarterly filers). That means filing required returns on time and paying taxes due, or making appropriate payment arrangements when necessary. The relief applies to eligible original returns beginning with tax year 2025, 2026 quarterly returns, and future filing periods as the IRS completes the transition away from First Time Abate. While the relief is automatic for eligible taxpayers, those who do not qualify may still request penalty relief through the IRS’s traditional “reasonable cause” process.
Why the IRS Made the Change
Under the previous First Time Abate program, taxpayers often had to know the relief existed and proactively contact the IRS to request it, even when they clearly qualified. The new AEP process removes that extra step by reviewing eligibility during return processing and automatically applying relief when appropriate. The IRS estimates the new system will help significantly more taxpayers receive penalty relief while reducing the administrative burden on both taxpayers and the agency. Taxpayers with questions about their eligibility or individual circumstances should review the IRS’s Administrative Penalty Relief guidance or consult a qualified tax professional.
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