IRS says automatic penalty relief starts this summer—who qualifies and what to watch

The IRS says it will begin sending Automatic Exemption from Penalty (AEP) starting this summer, replacing parts of the older First Time Abate workflow for eligible taxpayers. The point: reduce paperwork and make penalty relief more automatic for people with a track record of filing and paying on time.

What the IRS is changing

In an announcement dated July 8, 2026, the IRS said AEP is a new systemic process that replaces the long-standing First Time Abate administrative relief. Under AEP, eligible taxpayers generally do not need to request penalty relief—they’re instead expected to get a notice once relief is applied during processing.

When AEP starts

The IRS says AEP is expected to begin in summer 2026. It applies to eligible original returns beginning with:

• Tax year 2025 original returns
• 2026 quarterly returns and future tax periods

Who qualifies for AEP

Eligibility is tied to whether you have a history of timely filing and paying:

• You timely filed the same return type for the prior three years (or 12 consecutive quarters for quarterly returns), and
• You either had no penalty assessed (except the estimated tax penalty) or had a penalty assessed that was later abated for reasonable cause or IRS error.

For business taxpayers, the IRS adds additional conditions. For example, the IRS says it did not waive the failure to deposit penalty four or more times in the prior three years (or 12 consecutive quarters), and that the failure-to-deposit penalty was not charged for EFTPS avoidance.

What types of penalties AEP covers—and what it doesn’t

The IRS says AEP is designed to stop certain administrative penalties from being assessed during processing when AEP applies. The eligible penalty categories are:

• Failure to file
• Failure to pay
• Failure to deposit

But AEP is not universal. The IRS says you can’t get this relief for certain situations, including:

• Returns filed once or infrequently (event-based filing)
• the Daily Delinquency Penalty (DDP)
• Information reporting dependent on another filing

The IRS also gave examples in its newsroom release, saying some information returns and returns filed only in response to specific transactions or infrequent events—such as Form 706 and Form 709—generally are not eligible.

How the “automatic” process works for taxpayers

The IRS says AEP is applied when your original return completes processing. If your original return is eligible:

• the IRS won’t assess penalties for failure to file, failure to pay, or failure to make a deposit; and
• you should receive a notice explaining that AEP relief was granted.

The IRS says eligible taxpayers generally don’t need to contact the IRS or respond to the notice to get the relief.

If you receive a penalty notice during the transition

This is the scenario to watch next. The Taxpayer Advocate Service says taxpayers should not ignore an IRS notice assessing a failure-to-file, failure-to-pay, or failure-to-deposit penalty. If you received a penalty notice for a 2025 tax year return and you did not get a separate notice saying AEP was applied, it recommends:

• reviewing the notice carefully, and
• calling the IRS using the toll-free number on the notice to request penalty relief if you believe you qualify.

If you don’t qualify for AEP, the IRS says you may still be able to request penalty relief based on reasonable cause, and the IRS will notify you of its decision.

What to do now

• Keep your IRS letters. Don’t assume “automatic” means “no action ever.” Compare what the notice says about the penalty and whether it mentions AEP.
• If AEP isn’t mentioned and you think you qualify, check before paying. Follow the notice instructions and consider contacting the IRS using the number on the letter.
• Check whether your situation is excluded. AEP does not apply to all returns or penalty situations, including DDP and some event-based/information-reporting scenarios.

For eligible taxpayers, the IRS says AEP is meant to reduce burden by suppressing certain penalties during processing instead of forcing people to go through a request workflow. But during the rollout, your notice is still the practical place to confirm what happened for your specific return.

Sources

• IRS Newsroom (IR-2026-83) — “IRS Simplifies Penalty Relief: Introduces Automatic Process for Eligible Taxpayers” (July 8, 2026)
• Taxpayer Advocate Service (NTA Blog) — “A long-awaited taxpayer win: The IRS implements automatic penalty relief” (July 2026)

Related News

• Ways & Means advances 7 IRS bills: taxpayer rights, AI integrity, hospitals
• FDA update (July 16): Cyclospora outbreak linked to Taco Bell shredded lettuce
• FDA recall: Ola-Ola pounded yam over undeclared milk allergen—check dates
• FAA: Thunderstorms could delay ATL/PHL and Florida hubs — Thu, July 16