First-Time Abate is becoming Automatic Exemption.

FTA was never in the Internal Revenue Code. It lived in the Internal Revenue Manual as an administrative waiver for taxpayers with a clean compliance record. In 2026 the IRS began moving that idea into Automatic Exemption from Penalty (AEP). The eligibility logic is familiar — three prior years (or 12 consecutive quarters) of timely filing and payment — but the mechanics are not. AEP is applied during original return processing. The taxpayer does not file Form 843 to receive it.

Official IRS explanations are on Administrative penalty relief and Automatic Exemption from Penalty: What taxpayers should know.

How AEP works

AEP begins summer 2026. It may apply to eligible 2025 tax-year returns and 2026 quarterly returns (and later periods) on Forms 1040, 1065, 1120, 940, 941, 943, 944, 945, and CT-1. If you file or pay late but the lookback is clean, the IRS does not assess the covered penalty and sends a notice explaining why.

• No application, form, or separate request when AEP applies
• Covers failure-to-file, failure-to-pay, and failure-to-deposit — not every penalty type
• Unpaid tax and interest on tax still have to be paid
• If you receive a notice showing an assessed penalty and you believe AEP should have applied, contact the IRS — or authorize a representative to do it

When FTA still applies

FTA remains available, on request, for:

• Eligible 2024 tax-year returns
• Eligible 2025 quarterly returns
• Eligible 2025 tax-year returns processed before AEP started
• Eligible 2026 quarterly returns processed before AEP started

Those requests are not automatic. The taxpayer (or a representative) contacts the IRS or files Form 843. For original returns with due dates on or after January 1, 2027, FTA is replaced by AEP.

The lookback test is the same idea as before: timely filing and payment for the three prior years (or 12 quarters), no stuck penalty of the same type in that window, and the extra business-deposit rules the IRS lists for FTA/AEP.

Which penalties qualify

FTA and AEP both apply only to certain penalty types:

• Failure-to-File (§6651(a)(1)) on income tax returns (and the partnership / S-corp late-file penalties the IRS lists)
• Failure-to-Pay (§6651(a)(2) and (a)(3))
• Failure-to-Deposit (§6656) on employment tax deposits

They do not apply to accuracy-related penalties, fraud penalties, the estimated-tax penalty, most information-return penalties, daily delinquency penalties, or the Trust Fund Recovery Penalty.

When a specialist still helps

1. AEP did not apply. Eligibility failed, the return type is not covered, or the penalty type is outside AEP.
2. A notice already assessed the penalty. Transcripts show what happened; FTA may still be requestable on a transition period.
3. Reasonable cause. The durable path when administrative relief is unavailable — documented facts, not a clean-history waiver.
4. Already paid, plus interest. Form 843 is still the refund claim when a penalty (and interest on that penalty) was paid and can still be recovered under the ordinary §6511 statute.
5. Multi-year or representation cases. Form 8821 or 2848, mixed periods, and balances that need an installment agreement or offer in compromise.

How to request FTA when it still applies

1. Confirm the period is still in the FTA window — not an original return due on or after January 1, 2027, and not a period AEP already handled.
2. Confirm lookback compliance. Pull IRS transcripts (Form 8821 authorization) for the three prior years or 12 quarters.
3. Request FTA by calling the number on the notice, sending a written statement, or filing Form 843 with a citation to First-Time Abate. No reasonable-cause statement is required for FTA itself.

The refund, if penalties were already paid

When FTA (or reasonable cause) is granted on a penalty the taxpayer already paid, the IRS refunds the penalty plus the interest that was charged on it. AEP, by design, usually means the penalty was never assessed — so there is nothing to refund unless a later assessment slipped through.