Administrative relief from specific penalties can be granted under certain conditions. When this occurs, the IRS will issue formal communications regarding the impacted return type, tax period, and specific penalty.
The most common administrative penalty waiver provided by the IRS, First Time Abate (FTA), applies to taxpayers with three years of timely compliance history. However, FTA is transitioning to a new relief called Automatic Exemption from Penalty (AEP), starting Summer 2026.
First Time Abate (FTA)
FTA has been the most common administrative relief for individuals and businesses with a history of timely compliance. Though taxpayers must contact the IRS to request this relief, you don’t need to specify FTA as the relief sought or provide supporting documents in your request for relief. The IRS will review your account information to see if you meet the requirements for FTA.
Call the IRS at the toll-free number found in the top right corner of your notice or letter, or
Send a written statement or Form 843, Claim for Refund and Request for Abatement, to the address specified in the Form 843 instructions.
Automatic Exemption from Penalty (AEP)
AEP begins summer 2026. Under AEP, if you file or pay late in the current year but have timely filed returns and paid tax due for the three prior years (or 12 consecutive quarters for quarterly filers), you won’t be assessed a penalty. The following return series are eligible for AEP consideration:
Forms 1040, 1065, 1120
Forms 940, 941, 943, 944, 945
Form CT-1
AEP relief begins with 2025 tax year and quarterly returns:
2025 tax year returns, and subsequent
2026 quarterly returns, and subsequent
Taxpayers will know if they received this relief because they will receive a letter explaining that even though they filed late, paid the tax late, or didn’t make the deposit timely, the applicable penalties were not assessed due to their history of timely compliance. If the taxpayer received a notice showing an assessed penalty but believe they should have qualified for this relief, contact the IRS.
How AEP works
AEP is applied when the original return completes processing.
If the taxpayer files an eligible, original return late, or pay the tax late, and IRS records show a history of timely compliance over the prior three years (or 12 consecutive quarters):
- The IRS won’t assess penalties for failure to file, failure to pay, or failure to make a deposit.
- The IRS will send you a notice explaining AEP relief was applied.
- No need to contact the IRS or respond to the notice.
Penalties eligible for relief
The following penalties are eligible for relief, regardless of amount, under FTA or the new AEP:
- Tax returns – IRC 6651(a)(1)
- Partnership returns – IRC 6698(a)(1)
- S corporation returns – IRC 6699(a)(1)
- When the tax shown on the return is not paid by the due date – IRC 6651(a)(2)
- When the tax is required to be shown on a return, but was not, and that tax was not paid by the date stated in the notice or demand for payment – IRC 6651(a)
- When the tax was not deposited in the correct amount, within the prescribed time period, and/or in the required manner – IRC 6656
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