IRS to Implement New Automatic Exemption from Penalty System for Taxpayers
The Internal Revenue Service (IRS) is set to replace its existing First-Time Abatement process with a new Automatic Exemption from Penalty (AEP) system. This change will begin with certain 2025 tax returns and 2026 quarterly returns, with full implementation expected to replace the First-Time Penalty Abatement for returns due on or after January 1, 2027. The AEP program aims to streamline penalty relief by automatically waiving certain penalties for taxpayers who have a history of timely filing and payment. Previously, taxpayers often had to proactively request penalty relief through phone calls, correspondence, or by filing Form 843. The new system is designed to reduce the burden on taxpayers and expand access to penalty relief by making the process more automatic. Eligibility for AEP generally requires a history of timely filing and payment for the prior three years, or for quarterly filers, the prior 12 consecutive quarters. The program will cover common penalties such as failure-to-file, failure-to-pa... 
