What AEP does
AEP is applied by IRS systems during original-return processing. When the taxpayer qualifies, the IRS does not assess the covered failure-to-file, failure-to-pay, or failure-to-deposit penalty and sends a notice explaining the relief. No application, separate request, or Form 843 is required.
When it begins
The IRS is rolling out AEP in summer 2026. It starts with eligible 2025 tax-year returns and 2026 quarterly returns and continues for later periods. The listed return series include Forms 1040, 1065, 1120, 940, 941, 943, 944, 945, and CT-1.
Timely-compliance history
The same return type generally must have been filed timely for the prior three years, or 12 consecutive quarters for quarterly returns. IRS records also must satisfy the program's penalty-history rules. Additional conditions apply to business failure-to-deposit relief.
How it differs from First Time Abate
First Time Abate (FTA) required the taxpayer to contact the IRS and request administrative relief. AEP applies automatically. The IRS is phasing out FTA during 2026; FTA remains relevant to certain earlier periods and some returns processed before AEP begins for that return.
How it differs from reasonable cause
AEP relies on the return, period, penalty type, and prior compliance history. Reasonable cause is a separate case-by-case review of facts and circumstances that prevented compliance despite ordinary business care and prudence. A taxpayer who does not qualify for AEP may still request reasonable-cause relief when that penalty permits it.
What AEP does not do
- It does not remove unpaid tax or interest.
- It does not cover every return or every penalty.
- It does not excuse future filing, payment, deposit, or reporting duties.
- It does not replace the process for disputing an incorrect tax assessment.
Example
An individual files an eligible original Form 1040 late for tax year 2025. IRS records show the required prior compliance history. During processing, the IRS applies AEP, does not assess the covered late-filing penalty, and sends a notice explaining the exemption. The individual still owes any unpaid tax and interest.