Source: IR-2026-83 (7/8/26)

This AEP program replaces the prior IRS First Time Abate (FTA) program. It’s applied automatically by the IRS computer if a penalty is due and the computer finds a prior history of filing and paying on time.

Forms that qualify:

1. Individual Form 1040
2. Partnership Form 1065
3. Corporation Form 1120/1120-S
4. Payroll Forms 940, 941, 943, 944

Who qualifies:

1. The same return type was timely filed for 3 prior years (or 12 quarters for quarterly payroll returns)
2. In those 3 years, either no penalty was assessed (except estimated tax penalty) OR the penalty was assessed and later abated for reasonable cause.
3. For a business: The IRS did not waive the failure to deposit penalty four or more times during the prior 3 years (or 12 quarters); OR, the failure to deposit penalty was not charged for EFTPS avoidance (the business paid by check and not online); OR if the IRS doesn’t apply the new AEP, the business can request penalty relief based on reasonable cause and acting in good faith under Code Sec 6664(c).

How it works:

1. The IRS won’t assess a penalty for failure to file, to pay or to make a timely deposit.
2. The IRS will send a notice explaining that they applied AEP relief
3. The taxpayer WON’T need to reply to the notice. HOWEVER, the taxpayer is on notice that the AEP won’t be applied again (within the three year period).

Types of penalties impacted:

1. Failure to file tax returns
2. Failure to file partnership or S corporation returns.
3. Failure to pay the tax shown on the return by the due date.
4. Failure to deposit taxes in the correct amount or manner (e.g. payroll taxes paid through the EFTPS system)

Practical application: We are hopeful that the IRS computer system is now more capable and can implement this program seamlessly. Under the old FTA system, the abatement was seldom offered automatically and written requests for abatement and application of the FTA were common.