IRS Offers Automatic First-Time Penalty Abatement

Program Aims to Help About 1 Million Taxpayers Per Year

The IRS plans to automatically apply first-time penalty abatement for qualifying taxpayers, starting in the 2026 filing season. The automatic abatement applies to tax returns from tax year 2025 on failure-to-file, failure-to-pay, and failure-to-deposit penalties. 

About 1 million taxpayers will benefit from the program every year – the IRS expects to abate over $250 million in penalties annually, which should also free up about 100 to 150 IRS employees from focusing on penalty abatement to working on other tasks. 

Taxpayers who don't qualify for automatic relief can still contact the IRS to request penalty abatement based on reasonable cause or other remedies offered under the tax code. 

Key takeaways:

• Automatic penalty relief starts in filing season 2026 for penalties incurred on tax year 2025 returns. 
• Relief is available for late filing, late payment, and late deposit penalties. 
• The IRS plans to provide automatic relief to taxpayers who have not had a penalty reversed in the previous three tax years. 
• Approximately 1 million taxpayers will benefit from penalty relief each year, saving over $250 each on average.
• Taxpayers who don't qualify for automatic relief can still request penalty abatement for reasonable cause.

Who qualifies for automatic penalty relief in 2026?

The IRS will provide automatic first-time penalty relief to taxpayers who:

• incur failure to file, failure to pay, or failure to deposit penalties.
• have no penalties over the three previous tax years – if not required to file all of the three previous years, have no penalties for the years they were required to file.

Business taxpayers may also need to meet these requirements:

• do not have four or more failure-to-deposit waiver codes in the last three years.
• have not incurred a failure-to-deposit penalty for EFTPS avoidance. 

If the penalty applies to a tax return that is filed as married filing jointly, both taxpayers must meet the above criteria. The IRS will typically not apply automatic relief if only one spouse has a history of good compliance. 

How do you know if you qualify for automatic penalty relief?

Review the criteria above to see if you qualify for automatic relief. If penalties are waived from your account, the IRS will send a letter explaining that you received an automatic penalty waiver. 

At the time of writing, the IRS is still working on the letter for its automated FTA program. Most likely, the letter will be relatively short, and it will explain to the taxpayer that they incurred x penalties for x reasons, but the penalties were waived. 

You can also check your online IRS account to see if any penalties have been assessed or waived.

Which tax years qualify for automatic relief?

Returns from tax year 2025 will qualify for automatic relief if the taxpayer meets the requirements. Tax returns from subsequent years will also qualify for automatic penalty relief if the IRS continues this program. Taxpayers can only get first-time penalty abatement on tax returns for a single year – not on returns from multiple tax years. 

Erin Collins, the National Taxpayer Advocate, announced the automatic first-time relief at the AICPA National Tax Conference in November, 2025. Her comments suggest that this will be an ongoing program for the indefinite future, but to date, the IRS has not released a formal announcement. 

Brief history of the IRS automatic first-time abatement program

The IRS started offering first-time penalty abatement in 2001 for tax periods ending after December 31, 2000. However, taxpayers had to apply for this relief. It was not in the tax code. Instead, it was only in the Internal Revenue Manual (IRM), a training manual for IRS employees – as a result, tax prepapers and accountants often were not aware of this type of relief, unless they focused on tax resolution work. 

To get a first-time abatement in the past, taxpayers had to apply by calling the IRS, writing a letter, or filing Form 843. Once taxpayers reached out, the IRS reviewed their file and applied relief if they met the requirements. Form 843 allowed taxpayers to explain if they were applying for relief based on reasonable cause, which is when events out of your control prevent you from being compliant with the tax filing or payment requirements. 

However, even if a taxpayer qualified for reasonable cause relief, the IRS would process the abatement under the first-time rules. The IRS would also mark the taxpayer's file, noting that they'd received an abatement under the first-time rules. That effectively made taxpayers ineligible for first-time abatement for the next three years, regardless of whether they qualified for reasonable cause or not. 

Starting in 2018 and potentially even further back, the IRS started talking about automating first-time penalty abatement. After several years of figuring out how to automate this process, the agency was ready to roll for the 2026 filing season. However, some analysts have doubts about the efficacy of this program and whether or not it'll really help some taxpayers as much as intended. 

Possible problems with automatic first-time penalty abatement

The Taxpayer Advocate Service says that automatic relief will help about 1 million taxpayers per year, particularly lower-income taxpayers. In the last 25 years, many taxpayers have unnecessarily incurred penalties because they didn't know that relief was an option. 

However, tax professionals see potential problems for taxpayers, including:

• Reduced opportunity for reasonable cause penalty abatement: If a taxpayer is eligible for first-time abatement and reasonable cause abatement in the same year, the automatic procedures will provide them with FTA instead of reasonable cause. Say the next year, they also incur penalties but don't qualify for reasonable cause – now, they cannot have these penalties abated as they've already used their first-time abatement during the previous three tax years.
• Infringement of rights: The National Taxpayer Advocate has stated that taking away reasonable cause, which is a remedy offered under the law, and replacing it with first-time abatement, which is an internal IRS remedy, may infringe on taxpayers' right to only pay the correct amount of tax due, because of how it interacts with reasonable cause.
• Reduced penalty abatement under small partnership exception: When partnerships with 10 or fewer partners, that also meet other criteria, file their 1065 partnership returns late, the IRS may abate penalties under the small partnership exception rules (Rev Proc 84-35). Historically, a partnership could use these rules for penalty abatement and still qualify for FTA in a future year. However, if the IRS automatically applies FTA, the partnership will not be able to use FTA in the next three years.
• Mistakes with extended deadlines: Tax professionals worry that the IRS will not calculate penalties correctly in cases where filing or payment deadlines are moved in federally declared disaster areas. It's extremely common for the IRS to extend payment, filing, and deposit deadlines for individual and business taxpayers in these areas. 
• Penalty relief when taxes are not fully paid: The failure-to-pay penalty continues to accrue until taxes are paid in full, and these penalties can often run for several years. If the IRS abates this penalty before it's fully assessed, the taxpayer may still qualify to have the remaining amount of the penalty abated. If this doesn't happen automatically, taxpayers will need to reach out to the agency. 
• Worries about lack of IRS communication: Some tax professionals also worry that the IRS may not notify taxpayers that they've received automatic penalty abatement, but statements from the National Taxpayer Advocate indicate that the IRS already has a plan in place to notify taxpayers when penalties have been abated. 

If you face any of these types of problems or any other issues with IRS penalties, reach out to a tax professional for help with penalty abatement. TaxCure makes it easy to find a professional – use the filters to narrow down your search to someone with penalty abatement experience. Then, check out profiles and read reviews until you find the right fit. 

FAQs about automatic penalty abatement

Does the IRS have a new penalty abatement program?

No. In 2026, the IRS started automating its first-time penalty abatement program. The program uses the same rules and qualification criteria as it always has. However, now taxpayers don't have to apply. 

What if I have penalties on a tax return prior to tax year 2025?

Then, you must call the IRS to request penalty abatement. Alternatively, you can send in Form 843 or write a letter to the agency. 

What if I don't get automatic penalty abatement on my late tax return or payment?

Then, you may want to apply for relief based on reasonable cause. Taxpayers may qualify for reasonable cause abatement if events outside of their control – death, illness, natural disaster, loss of records, etc prevented them from paying, filing, or depositing taxes on time. Learn more about reasonable cause requirements.

Can businesses qualify for automatic penalty relief?

Yes, businesses may qualify for automatic first-time penalty relief if they incur a failure-to-deposit, failure-to-file, or failure-to-pay penalty. 

What is one-time forgiveness?

The IRS does not use the phrase "one-time forgiveness" – it does not apply to an official IRS program. However, sometimes people refer to first-time abatement as "one-time forgiveness" simply because it's available once after every three years of compliance. If you get first-time abatement, you cannot get penalties abated under this program for the next three tax years. However, if you incur another penalty four or five years later, you should qualify for another first-time abatement.