If you missed a tax deadline and are worried about an IRS late penalty, there could be good news. The IRS will now erase that late penalty automatically as long as you’ve filed and paid on time in recent years.
How the New IRS Penalty Relief Works
The new program, started this summer, is called Automatic Exemption from Penalty — or AEP. It replaces the old First Time Abate relief, which put the burden on taxpayers. AEP is automatic.
With previous missed deadlines, the IRS added a penalty, then you had to call or file a form to get it removed.
Now the IRS checks your track record while processing your return. If your history’s clean, it skips the penalty and sends you a notice explaining why.
About 220,000 people got relief the old way in one recent year. AEP would have helped about 1.5 million.
Who Qualifies for Automatic Penalty Relief
To qualify, you’ll need a clean filing and payment history, including for:
- Yearly returns: Filed and paid on time for the three prior years
- Quarterly returns: On time for the last 12 quarters in a row
If you qualify, AEP can wipe out three penalties:
- Failure to file: You turned in your return late.
- Failure to pay: You paid your tax bill late.
- Failure to deposit: Your business missed a deposit.
Note: Even a single gap in those three years or 12 quarters means you don’t qualify.
What AEP Won’t Do
- You still owe the tax. AEP only stops certain penalties. The tax and interest stay.
- Some penalties don’t qualify. Accuracy-related penalties, information return penalties, and one-off filings like estate or gift tax returns are out.
- Foreign reporting is separate. FBAR and forms like 3520, 5471, 8865, and 8938 aren’t covered and need a different path.
AEP Key Dates
- Summer 2026: The IRS has rolled out the program for tax year 2025 returns and 2026 quarterly returns.
- During the transition: You might still get a penalty notice if your return was processed before AEP kicked in. If you qualify, call and request the old First Time Abate relief. It’s not automatic, so don’t assume the system catches it.
- 1, 2027, and beyond: AEP is fully in effect for returns due on or after this date, and you shouldn’t have to do anything.
What to Do If You Get an IRS Penalty Notice
Don’t ignore it. If you didn’t also get a notice saying the IRS applied AEP, read it closely. Then, call the number on it and ask about relief. Have your notice, the penalty type, the tax year, and your reason ready.
If you don’t qualify for AEP, you can still ask for reasonable cause relief, like a serious illness, a natural disaster, or lost records. The IRS reviews those case by case.
If you have questions about a tax penalty or penalty relief, let us know.