IRS Automatic Exemption from Penalty (AEP) rollout
Key Questions
What is the Automatic Exemption from Penalty (AEP) program?
The AEP is a new IRS program starting summer 2026 that automatically grants penalty relief for failure-to-file, failure-to-pay, and failure-to-deposit penalties to taxpayers with a clean three-year compliance history, replacing the manual First Time Abate process.
How many taxpayers are expected to benefit from AEP?
An estimated 1.5 million taxpayers will receive automatic relief under AEP, compared to only 220,000 who previously requested manual FTA waivers each year.
When does the AEP rollout begin and what else is involved?
AEP begins in summer 2026 and is now live following the IRS announcement. The rollout includes warnings about listed transactions and identity theft alongside the penalty relief changes.
IRS introduces Automatic Exemption from Penalty (AEP) starting summer 2026, replacing First Time Abate (FTA). No manual request needed for clean 3-year compliance history. Applies to failure-to-file, failure-to-pay, failure-to-deposit penalties. Estimated 1.5M taxpayers will benefit automatically vs 220K manual FTA requests. IRS also warns about listed transactions and identity theft in conjunction with AEP rollout. This is a major shift in penalty relief process, now live.