Taxes, Cash & Savings · Surprise rank #70
Good Tax History? IRS Is Starting to Remove Certain Late-Filing and Late-Payment Penalties Automatically
Beginning in summer 2026, the IRS is transitioning from request-based First Time Abate to Automatic Exemption from Penalty (AEP) for eligible returns.
Who
Eligible taxpayers with the required three prior years of timely filing/payment compliance, or 12 consecutive timely quarters for quarterly filers.
What to do
Start here: No action is needed when AEP applies. If an eligible penalty was assessed during the transition, review the notice and contact the IRS because First Time Abate remains available for specified transition periods.
Eligibility: AEP begins with eligible 2025 tax-year returns and 2026 quarterly returns. The taxpayer must satisfy the IRS compliance-history and eligible-return requirements.
What you get
AEP prevents certain failure-to-file, failure-to-pay and failure-to-deposit penalties from being assessed when the taxpayer meets the current compliance-history rules.
Benefit: Automatic relief from covered penalties without filing a separate penalty-abatement request.
Possible value: Depends on the penalty that otherwise would have been assessed; taxes and interest remain due.
Good to know
Important: AEP does not erase tax or interest and does not cover every penalty or return. First Time Abate is being phased out and is replaced by AEP for eligible original returns due January 1, 2027 or later.
Availability: AEP rollout began summer 2026; First Time Abate remains transitional for specified periods
Why people miss it: Many taxpayers still know the older rule that required them to call and request First Time Abate, while the IRS is moving eligible cases to automatic relief.
Sources reviewed: Aug 10, 2026