Tax Tip #308
IRS Simplifies Penalty Relief With Introduction of Automatic Process for Eligible Tax Payers
Automatic Exemption from Penalty (AEP) provides automatic penalty relief and will replace First Time Abate (FTA) for eligible returns with original due dates on or after January 1, 2027.
AEP applies to eligible original returns beginning with tax year 2025 and 2026 quarterly returns as well as future tax periods. Taxpayers qualify if they have a history of timely filing the applicable return and paying any tax due for the three prior years (or 12 consecutive quarters for quarterly returns). Eligible taxpayers do not need to request penalty abatement.
The following penalties are eligible for AEP:
- Failure to file
- Failure to pay
- Failure to deposit
The IRS will automatically apply AEP and issue a notice confirming that the relief was granted. However, not all returns are eligible for AEP. For example, information returns, US estate tax returns (Form 706), and gift tax returns (Form 709) do not qualify.
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