IRS to grant penalty relief automatically to compliant taxpayers

The IRS will begin abating certain penalties automatically this summer, reported by Martha Waggoner at the Journal of Accountancy. The program is called Automatic Exemption from Penalty. It replaces First Time Abate. Three penalties qualify: failure to file, failure to pay, and failure to deposit. Taxpayers qualify with a record of timely filing and payment across the three prior years, or 12 consecutive quarters for quarterly returns. Relief applies to eligible original returns for tax years 2025 and 2026 forward, and fully displaces First Time Abate for returns with original due dates on or after January 1, 2027. About 220,000 taxpayers received the manual relief in fiscal 2025. The Taxpayer Advocate Service estimated more than 1.5 million would have qualified under the automatic version. Tax, interest, and ineligible penalties remain due. Forms 706 and 709 are generally excluded.