Administrative penalty relief

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 IRS has provided different types of administrative relief over the years.

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.

On this page

• Formal communications of administrative relief
• First Time Abate (FTA)
• Automatic Exemption from Penalty (AEP)
• Penalties eligible for relief
• How to qualify for the relief
• Comparing FTA and AEP
• What if I don’t qualify for the relief?
• Interest relief

Formal communications of administrative relief

The IRS may announce administrative relief of certain penalties for specific returns and tax periods through:

• Policy statements
• News releases
• Notices
• Other IRS formal communications

Example

New tax legislation is passed late in the year. While the IRS is working on guidance to taxpayers to help explain the new law, the IRS publishes a news release announcing administrative penalty relief for taxpayers who are impacted by the changing legal requirements. You are now eligible for this administrative penalty relief and don’t need to take any action.

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 this tax year and quarterly returns:

• 2025 tax year returns, and subsequent
• 2026 quarterly returns, and subsequent

You’ll know if you got this relief because you’ll receive a letter explaining that even though you filed late, paid the tax late, or didn’t make the deposit timely, the applicable penalties were not assessed due to your history of timely compliance. If you receive a notice showing an assessed penalty but believe you should have qualified for this relief, contact us.

How AEP works

AEP is applied when your original return completes processing.

If you file 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.
• You don’t need to contact the IRS or respond to the notice.

You are liable for payment of any unpaid tax, interest, or other penalty assessment not subject to AEP relief.

Penalties eligible for relief

The following penalties are eligible for relief, regardless of amount, under FTA or the new AEP:

Failure to File

• Tax returns – IRC 6651(a)(1)
• Partnership returns – IRC 6698(a)(1)
• S corporation returns – IRC 6699(a)(1)

Failure to Pay

• 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)(3)

Failure to Deposit

When the tax was not deposited in the correct amount, within the prescribed time period, and/or in the required manner – IRC 6656

How to qualify for the relief

You must have a timely compliance history. This means:

• The same return type, as the original return, was timely filed for the prior three years (or 12 consecutive quarters), and
• Either no penalty (except the estimated tax penalty) was assessed or a penalty was assessed, but later abated for reasonable cause or IRS error, and
• You meet the additional criteria listed below for business returns.

Additional requirements for business taxpayers

In addition to the above:

• The IRS did not waive the failure to deposit penalty four or more times during the prior three years (or 12 consecutive quarters), and
• The failure to deposit penalty was not charged for Electronic Federal Tax Payment System (EFTPS) avoidance.

Not eligible for the relief

You cannot receive this relief for:

• Returns filed once or infrequently (i.e., event-based filing requirements), or
• The Daily Delinquency Penalty (DDP), or
• Information reporting dependent on another filing.

Comparing FTA and AEP

What if I don’t qualify for the relief?

If you don’t qualify for the relief, you may request penalty relief based on reasonable cause. The IRS will notify you of its decision.

Interest relief

The IRS assesses interest on penalties. Interest increases the amount you owe until you pay your balance in full. However, we'll automatically reduce or remove the interest related to a penalty if any of your penalties are reduced or removed. For more information about interest assessed on penalties, see Interest.