IRS Penalty Relief in 2026: What Taxpayers Need to Know
Posted in Offshore Account Update on August 31, 2026 | Share
The IRS recently transitioned to a new penalty relief system for U.S. taxpayers. As of Summer 2026, taxpayers who have timely met their obligations for the past three years are eligible for the IRS’ Automatic Exemption from Penalty (AEP) for delinquent filings and payments. However, other enforcement risks remain, and delinquent taxpayers must make informed decisions about how best to deal with the IRS.
The Internal Revenue Service (IRS) is transitioning to a new “first-time” penalty system in 2026. The IRS’ long-standing First Time Abatement (FTA) program is being phased out, and the IRS’ new Automatic Exemption from Penalty (AEP) program is taking its place. Learn more from Washington, D.C. IRS tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:
AEP to Replace FTA Beginning Summer 2026
The IRS has stated that its new AEP program will take effect in “Summer 2026.” Under this program, qualifying taxpayers who file delinquent returns or make delinquent payments are automatically eligible for penalty relief. This means the IRS will not assess penalties that would otherwise apply, and taxpayers do not need to take any additional steps to receive available penalty relief.
As explained by the IRS, AEP is available to taxpayers who:
- Have filed and paid on time for the past three years; and
- Need to file or pay taxes related to IRS Form 940, 941, 943, 944, 945, 1040, 1065, 1120, or CT-1.
Additional requirements apply to business taxpayers. Eligible taxpayers will receive a letter from the IRS explaining that no penalties are being assessed despite their delinquency. Taxpayers who believe they are eligible but still receive a penalty assessment should consult with a tax lawyer about their next steps.
What if You Don’t Qualify for AEP?
Taxpayers who don’t qualify for AEP may qualify for relief under the IRS’ other penalty relief programs. While the FTA program is going away, these other programs are not. When necessary, delinquent taxpayers can consider options such as submitting an offer in compromise or making a voluntary disclosure.
How Thorn Law Group Can Help
At Thorn Law Group, we help individual and business taxpayers come into compliance when they are behind on their federal filing and payment obligations. We help our clients evaluate all available options and make strategic decisions based on their specific circumstances. If you have questions about the IRS’ new Automatic Exemption from Penalty (AEP) or any other federal tax matters, we invite you to contact us for a confidential consultation.
Speak with Washington D.C. IRS Tax Lawyer Kevin E. Thorn in Confidence
To request a confidential consultation with Washington D.C. IRS tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, contact us today. Call us at 202-349-4033 to schedule an appointment, or tell us how we can reach you online, and we will be in touch shortly.
