07/23/2026
The IRS is making it easier for eligible small businesses and individual taxpayers to receive penalty relief with a new Automatic Exemption from Penalty process launching this summer.
The new process automatically provides relief to taxpayers with a history of filing and paying on time and applies to eligible tax year 2025 and 2026 quarterly returns, as well as future tax periods.
Under AEP, taxpayers qualify if they have a history of timely filing their return and paying any tax due in the three prior years or 12 consecutive quarters for quarterly returns.
Taxpayers who qualify will automatically receive relief from common penalties like failure-to-file, failure-to-pay and failure-to-deposit. If eligible, the IRS will automatically apply AEP and send the taxpayer a notice confirming the relief was granted.
The IRS will begin phasing out First Time Abate this summer, with AEP fully replacing it for eligible returns due on or after Jan. 1, 2027.
Businesses and individual taxpayers who don't qualify for AEP can request penalty relief based on reasonable cause. See Penalty relief for reasonable cause for more information on this option. Information returns and returns filed only in response to specific transactions or infrequent events, such as Form 706, U.S. Estate Tax Return or Form 709, Gift Tax Return, generally aren’t eligible for AEP.
