The IRS announced a new automatic penalty relief program on July 8, 2026, that will eliminate the need for eligible taxpayers to request forgiveness for common filing and payment mistakes.
The Automatic Exemption from Penalty, or AEP, replaces the long-standing First Time Abate program and will automatically suppress penalties for failure-to-file, failure-to-pay, and failure-to-deposit when taxpayers meet basic eligibility criteria, according to an IRS news release (IR-2026-83).
To qualify, taxpayers must have a history of timely filing returns and paying any tax due in the three prior years, or 12 consecutive quarters for those filing quarterly returns. The program begins this summer for eligible 2025 tax year returns and 2026 quarterly returns.
“Automatic Exemption from Penalty reflects the IRS’ commitment to making the payment of taxes owed simpler and more consistent,” said IRS Chief Executive Officer Frank J. Bisignano in the announcement. “By automatically applying penalty relief, the IRS recognizes that taxpayers who historically pay on time should not have to make a formal request for relief that is routinely granted.”
Before AEP, eligible taxpayers had to contact the IRS and request First Time Abate relief—a process that created barriers for many. According to the National Taxpayer Advocate, the old system meant relief often depended on whether a taxpayer knew what to ask for, had access to professional help, or could reach the IRS by phone.
Removing Barriers to Relief
The scope of the change is significant. In fiscal year 2025, roughly 220,000 taxpayers received manual First Time Abate relief, according to the Taxpayer Advocate Service. Under AEP, the National Taxpayer Advocate estimates that over 1.5 million taxpayers would have qualified for automatic relief during that same period—about seven times as many.
The National Taxpayer Advocate called the shift “a major taxpayer win,” particularly for low-income taxpayers and those without tax professionals. “A penalty that may seem modest to some taxpayers can be financially significant for a taxpayer struggling to pay rent, utilities, groceries, transportation, or medical expenses,” the Advocate wrote in a blog post on July 8, 2026.
Under AEP, eligible taxpayers receive no penalty notice at all during return processing if they qualify. Instead, the IRS sends a notice confirming that relief was granted. Taxpayers do not need to respond or take further action.
The IRS will phase out First Time Abate during the summer 2026 transition. For returns with original due dates on or after January 1, 2027, AEP will be the standard relief process. During the transition period, some taxpayers may still receive penalty notices for 2025 returns and can contact the IRS to request First Time Abate if they believe they qualify.
Taxpayers who do not qualify for AEP may still request relief based on reasonable cause, which applies when circumstances beyond their control prevented timely filing or payment.
Sources
- Internal Revenue Service — official announcement of Automatic Exemption from Penalty program (IR-2026-83) on July 8, 2026, outlining eligibility, scope, and implementation timeline
- Taxpayer Advocate Service — blog post by National Taxpayer Advocate on July 8, 2026, detailing impact and burden reduction for eligible taxpayers, including estimate that 1.5 million taxpayers could have received relief versus 220,000 under manual First Time Abate in FY2025
