07/14/2026
IRS Introduces Automatic Exemption from Penalty (AEP): A Major Win for Compliant Taxpayers & Businesses
I've seen too many clients pay avoidable penalties simply because they didn't know about relief options.
That's why I'm excited about the IRS's new Automatic Exemption from Penalty (AEP) program rolling out this summer 2026. It addresses a key limitation of the longstanding First Time Abate (FTA) process.
Quick Background on FTA
Under IRM 20.1.1.3.3.2.1 (3-29-2023), FTA provided administrative relief for:
Failure to file: IRC §6651(a)(1) (individuals), §6698(a)(1) (partnerships), §6699(a)(1) (S corporations)
Failure to pay: §6651(a)(2) & (a)(3)
Failure to deposit: §6656
Eligibility required a clean compliance history over the prior three tax years (or 12 consecutive quarters). However, it was manual you or your representative had to request it, often via Form 843. Many eligible taxpayers missed out.
The AEP Upgrade
AEP makes relief automatic during return processing for eligible original returns starting with tax year 2025, 2026 quarterly returns, and all future periods.
Same core criteria as FTA (3-year lookback), but clearer and more accessible:
- No action required from the taxpayer.
- Available multiple times (not limited to "first time").
- Directly helps those without professional assistance while still requiring practitioners to monitor for IRS errors.
Transition Details: FTA continues for prior periods and during the 2025/2026 overlap. FTA will no longer apply to eligible returns with original due dates on or after January 1, 2027.
Why This Matters for You
Whether you're a high-income solo S-Corp owner maximizing defined benefit plan contributions, an options trader reporting on Form 6781, facing Schedule C audits, CP504 notices, or potential levies this directly impacts your bottom line and peace of mind.
The tax code (IRC) is your shield, not a weapon. But IRS implementation isn't perfect. My team specializes in verifying AEP application, requesting corrections, and full tax resolution including SFRs (§6020(b)), penalty abatements, and collections defense.
Ready to protect your compliance record and finances?
📞 Schedule an appointment at: 1-866-907-1845
🌐 Visit: www.metrotaxmultiservices.com
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