The IRS just removed the step that most payroll teams didn't know they could take. Starting summer 2026, eligible taxpayers with a clean compliance history will no longer need to request penalty relief — the IRS will grant it automatically.
The new program is called the Automatic Exemption from Penalty, or AEP. It replaces First Time Abate and applies to payroll-relevant returns beginning with tax year 2025 and 2026 quarterly filings. Here's what changed, who qualifies, and what the transition looks like.