What Taxpayers Should Know About the IRS's New AEP Program

A new IRS program could make penalty relief significantly simpler for taxpayers who consistently meet their filing and payment obligations.

The Automatic Exemption from Penalty (AEP) program is designed to automatically provide relief to eligible taxpayers without requiring them to submit a separate request.

Eligibility is based largely on compliance history. Taxpayers generally need to have filed on time and paid any tax due during the previous three years. Quarterly filers must generally have 12 consecutive quarters of timely compliance.

For eligible returns, AEP can prevent certain penalties from being assessed, including failure-to-file, failure-to-pay and failure-to-deposit penalties.

Taxpayers should understand that automatic penalty relief does not eliminate their responsibility to pay taxes and interest. Any penalties that are not covered by AEP may also remain due.

The IRS is also phasing out its First Time Abate program as AEP takes its place. During the transition, some taxpayers may still receive penalty notices and may need to contact the IRS if they believe they qualify for First Time Abate.

For eligible returns with original due dates on or after January 1, 2027, AEP will replace First Time Abate.