IRS Makes Penalty Relief Automatic for Eligible Taxpayers

The IRS is making it easier for taxpayers with a strong history of compliance to receive certain types of penalty relief.

Beginning in summer 2026, the IRS is introducing the Automatic Exemption from Penalty (AEP) process. Instead of requiring eligible taxpayers to request relief, the IRS will automatically apply it during processing.

To qualify, taxpayers generally must have a history of filing returns on time and paying taxes due during the previous three years. For quarterly filers, the requirement is 12 consecutive quarters.

When applicable, AEP can prevent penalties related to: Failure to file, Failure to pay, and Failure to deposit.

Eligible taxpayers do not need to take action. If the IRS applies the relief, they will receive a notice confirming it.

However, AEP does not apply to every type of return. Certain information returns and returns filed because of specific or infrequent transactions may not qualify.

The change is intended to make penalty relief more consistent and reduce the burden on taxpayers who have demonstrated a history of timely compliance.