The IRS is now erasing failure-to-file, failure-to-pay and failure-to-deposit penalties of any size for taxpayers with a clean three-year record, or 12 consecutive clean quarters for those who file quarterly. The agency announced the Automatic Exemption from Penalty in news release IR-2026-83 on July 8, 2026, and says eligible taxpayers do not have to ask for it.

“Taxpayers who historically pay on time should not have to make a formal request for relief,” IRS Chief Executive Officer Frank J. Bisignano said in the IRS announcement. The program is replacing First Time Abate, the older relief that required a call or a letter.

What counts as a clean record?

The test is tied to the type of return. The IRS’s administrative penalty relief page says the same return type must have been timely filed for the prior three years, or 12 consecutive quarters for quarterly returns. A history of paying any tax due on time counts the same way.

Prior penalties matter too. Either no penalty, other than the estimated tax penalty, was assessed in that period, or a penalty was assessed and later removed for reasonable cause or IRS error. Business filers face two more conditions: the failure-to-deposit penalty cannot have been waived four or more times in the period, and it cannot have been charged for avoiding the Electronic Federal Tax Payment System.

Does a taxpayer with a penalty notice have to ask for it to be removed?

For eligible filers, no. The IRS page says relief under the new process is automatic and that taxpayers “don’t need to contact the IRS or respond to the notice.” If the filer qualifies, the IRS applies the relief and sends a notice confirming it. A penalty notice that arrives during the transition is a different case: taxpayers who believe they qualify but receive one can contact the IRS to request First Time Abate.

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Which penalties and which returns are covered

The IRS lists three penalty groups, each “regardless of amount.” Failure to file is covered under Internal Revenue Code sections 6651(a)(1), 6698(a)(1) and 6699(a)(1). Failure to pay falls under sections 6651(a)(2) and 6651(a)(3). Failure to deposit falls under section 6656.

The automatic process applies to 2025 tax year returns and later, and to 2026 quarterly returns and later. It began in summer 2026. Returns filed once or infrequently, such as Forms 706 and 709, are generally not eligible, and neither are the Daily Delinquency Penalty and information reporting that depends on another filing.

What the relief leaves in place

Interest is not waived on tax that is still owed. The IRS page says taxpayers still owe unpaid tax, interest and any penalty the relief does not cover. When a penalty is reduced or removed, though, the IRS says it will “automatically reduce or remove the interest related to a penalty” by the same amount.

The failure-to-pay penalty also behaves differently under the two programs. Under First Time Abate it may keep accruing until the tax is fully paid, the IRS page says, while under the automatic exemption it does not accrue on unpaid tax.

When First Time Abate still applies

The automatic exemption fully replaces First Time Abate for eligible returns with original due dates on or after January 1, 2027. Until then, First Time Abate stays available for 2025 tax year and 2026 quarterly returns that the automatic process does not reach, and for all earlier years and periods.

First Time Abate has been “the most common administrative relief for individuals and businesses with a history of timely compliance,” the IRS says. Taxpayers request it by calling the number on the notice, sending a written statement or filing Form 843, with no specific wording or supporting documents required.

Penalty still on the IRS notice after the automatic pass?

A late-filing penalty that survives the automatic review usually means one of the conditions above was not met: the return type, the three clean years, a prior penalty or an excluded form. Answering the wrong notice in the wrong way is how a removable penalty turns into a balance that keeps growing.

The IRS Refund Recovery Kit includes a notice decoder that explains what each IRS letter is asking for, and a refund status tracker spreadsheet for keeping the dates straight. It also covers the refund-trace steps using Form 3911 and the 3-year refund deadline.

Open the notice decoder kit for a late-filing penalty letter →

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This article was produced with AI assistance and edited for accuracy against the sources linked above.