The US Internal Revenue Service (IRS) is rolling out a new automatic process that will grant penalty relief to taxpayers with a strong record of filing and paying on time.
The IRS said the new Automatic Exemption from Penalty (AEP) will replace the long-running First Time Abate programme.
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It added that the new AEP aims to simplify procedures and ease the burden on taxpayers who have demonstrated timely compliance.
According to the agency, the move is aimed at promoting “fairness and consistency in the application of penalty relief” while encouraging taxpayers to continue meeting their obligations voluntarily.
IRS CEO Frank J. Bisignano said: “Automatic Exemption from Penalty reflects the IRS’ commitment to making the payment of taxes owed simpler and more consistent.
“By automatically applying penalty relief, the IRS recognises that taxpayers who historically pay on time should not have to make a formal request for relief that is routinely granted.”
The AEP will apply to eligible original returns beginning with tax year 2025 and to 2026 quarterly returns. It will also extend to later tax periods.
To be eligible, taxpayers must have filed on time and paid any tax due for the previous three years, or for 12 consecutive quarters in the case of quarterly filings.
Taxpayers will not need to apply for the AEP. If they qualify, the IRS will automatically grant the relief and send a notice confirming that it has been applied.
The IRS noted that some types of returns, such as information returns and those submitted only for specific transactions or infrequent events, will not fall under the AEP.
The agency plans to begin phasing out First Time Abate and moving to the AEP from the “summer of 2026”.
During this transition, some taxpayers who would meet the AEP criteria may still receive penalty notices for tax year 2025 and 2026 quarterly returns.
In those cases, taxpayers who believe they qualify may contact the IRS to request First Time Abate.
The AEP will fully replace First Time Abate for eligible returns with original due dates on or after 1 January 2027. Taxpayers who do not qualify for the AEP will still be able to seek penalty relief based on reasonable cause.
