I don't often get to write about good news from the IRS, but today I can.
The IRS has announced a change that could save you both time and frustration. Beginning this summer, the IRS is replacing its First Time Abate program with a new Automatic Exemption from Penalty (AEP) program.
What does that mean?
For many taxpayers, it means you won't have to ask the IRS to remove certain penalties anymore.
In the past, every 4 years you could ask for First Time Abatement of Penalties. To qualify you had to be current on your tax filings for the prior 3 years.
The catch? You had to know the program existed and contact the IRS to ask for it. Many taxpayers never realized this option was available.
Under the new Automatic Exemption from Penalty, the IRS will do the work for you. If you qualify, the IRS will automatically remove eligible penalties during processing. You won't need to file a request or spend hours on the phone asking for relief.
If the IRS grants the relief, you'll receive a notice letting you know.
The new program generally applies to taxpayers who have:
Filed their tax returns on time for the previous three years (or 12 consecutive quarters for quarterly filers)
Paid any taxes due during that same period
The automatic relief applies to eligible original returns beginning with tax year 2025 and quarterly returns beginning in 2026. For years prior to 2025, you will need to ask the IRS for First Time Abatement of Penalties.
If you qualify, the IRS may automatically remove penalties for:
Failure to file
Failure to pay
Failure to deposit
That's welcome news for taxpayers.
Automatic penalty relief doesn't erase your tax bill. If you owe taxes, you'll still need to pay them. You'll also owe any applicable interest, and penalties that don't qualify for this program will still apply.
If you don't qualify for Automatic Exemption from Penalty, you may still be able to request penalty relief based on reasonable cause, just as taxpayers have done in the past.
I like this change because it removes one more hurdle for taxpayers who have consistently tried to do the right thing. Too often, taxpayers miss out on relief simply because they didn't know they had to ask.
Now, for many people, the IRS will automatically apply the relief they would have likely received anyway. That's a win for taxpayers.
As always, the best way to avoid penalties is to file your returns on time, pay your taxes when they're due, and stay current with the IRS. But it's nice to know that when an honest mistake happens, the process is becoming a little simpler.
Tax laws and IRS procedures continue to change. Staying informed can save you time, money, and unnecessary stress. That's why I enjoy sharing these updates with you.
Comments(1)