IRS Replaces 'First Time Abate' with Automatic Penalty Relief

The IRS announced it will replace its "First Time Abate" program with a new Automatic Penalty Relief program, known as AEP, that takes effect for returns with original due dates on or after January 1, 2027.

Under the old system, taxpayers had to call the IRS or write in to request penalty relief — and most people never knew to ask.

AEP changes that by automatically waiving penalties for eligible taxpayers without any action required on their part.

The program covers three of the most common penalties: failure to file, failure to pay, and failure to deposit, which applies to businesses that didn't send payroll taxes to the IRS on time.

To qualify, you need a clean compliance record for the three prior tax years — meaning no penalties during that period.

Most taxpayers will first encounter AEP when filing their 2026 tax returns in 2027, which is the first year returns will have original due dates covered by the new program.

If you have a penalty on an older return right now, you may still be able to request the existing First Time Abate relief manually while the IRS completes the transition.

The change is good news for taxpayers who slip up for the first time, but understanding what failure-to-file and failure-to-pay penalties cost — and how to avoid them — still matters, since AEP only applies if you meet the three-year clean history requirement.