IRS Introduces New, Automated Process for Qualifying Taxpayers to Receive Penalty Relief by Angie Adames, CPA
Posted on September 14, 2026
by
Angie Adames
The IRS recognizes that mistakes happen and has long offered qualifying taxpayers relief from certain penalties through its First-Time Abatement (FTA) administrative Relief program. Historically, however, many taxpayers did not receive this relief because they did not know it existed or they failed to reach the IRS to request it. This changes immediately with the introduction of the IRS’s new Automatic Exemption from Penalty (AEP) and the phase-out of the agency’s FTA Relief program.
The AEP aims to simplify the process of penalty abatement through a system that automatically identifies taxpayers with a history of timely filing returns and paying taxes due during the previous three years (or 12 consecutive quarters for quarterly returns) and prevents certain penalties from being assessed during original return processing. Taxpayers do not need to contact the IRS or take any other action to receive this relief. The IRS has already begun implementing the AEP for eligible 2025 tax-year returns and quarterly 2026 returns and issuing notices to taxpayers confirming penalty relief.\
Qualifying taxpayers should note that the AEP does not apply to all tax returns. For example, informational returns and those filed in response to specific transactions or infrequent events (i.e., U.S. Estate Tax and Gift Tax returns) are not eligible. In addition, the relief from penalties does not exempt qualifying taxpayers from interest charges on unpaid taxes and penalties until they pay their tax bill in full. Taxpayers who do not qualify for AEP may still seek relief based on reasonable cause.
During the transition period to AEP, qualifying taxpayers who receive penalty notices for eligible tax year 2025 and 2026 quarterly returns should reach out to their tax advisors for assistance.
About the Author: Angie Adames is a principal of Tax Compliance and Consulting with Baker Tilly x Berkowitz Pollack Brant, where she provides tax and consulting services to real estate companies, manufacturers and closely held entities. She can be reached at the CPA firm’s Miami office at (305) 379-7000 or info@bpbcpa.com.
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