08/11/2026
The IRS has announced a new systemic penalty-relief program known as the Automatic Exemption from Penalty (AEP). AEP prevents the IRS from assessing certain failure-to-file (FTF), failure-to-pay (FTP), and failure-to-deposit (FTD) penalties during original return processing when the taxpayer has the required timely compliance history. No application, form, or separate request is needed.
To qualify, the same return type must have been timely filed for the prior three years (or 12 consecutive quarters for quarterly filers), and either no penalty (other than an estimated tax penalty) was assessed during the lookback period, or any penalty assessed was later abated for reasonable cause or IRS error. For business taxpayers, two additional requirements apply: the IRS must not have waived the FTD penalty four or more times during the prior three years or 12 consecutive quarters, and the FTD penalty must not have been charged for Electronic Federal Tax Payment System (EFTPS) avoidance.
The program is expected to be begin in summer 2026 and begins with 2025 and subsequent tax year returns. It will apply to the following return series – Forms 1040, 1065, 1120, and various payroll forms.
