First Time Abate (FTA) has been available to taxpayers who have filed and paid on time for the past three years. The taxpayer calls up the IRS and asks for FTA, and if they qualify it is applied to the account and the penalties are wiped out. FTA was an easy way to get out of penalties, and it was a way for preparers to look like superheroes to their clients without much effort.
The IRS announced that FTA is being replaced with new Automatic Exemption from Penalty(AEP). This new automatic relief is being rolled out in the summer of 2026, which means that taxpayers may already see penalties abated without taking any action. Under FTA, eligible taxpayers could easily get the relief by calling in, but taxpayers meeting the eligibility for FTA who didn’t know that it existed, were unsure how to request it, or who were not able to get through to the IRS would end up paying those penalties. Automatic relief applies the abatement to all eligible taxpayers without any action on their part, and also reduces the amount of IRS hours spent fielding calls requesting FTA.
FTA for a Rainy Day
While it was not uncommon to be able to get FTA applied to those higher penalty years, this was, frankly, not the way it’s supposed to work. The 3-year lookback is based on filing compliance, not when the FTA was last claimed, so saving it for those big penalties risked losing abatement to an agent who knew the rules.
The End of Abatement?
Reasonable cause abatement may be granted in cases of serious illness or death, casualty or disaster, inability to locate documents or other information despite a good faith effort, or reasonable reliance on a professional. That last one comes with some caveats. It’s not enough to say “my tax pro said they would file my extension.”
Claims of reasonable reliance on a professional need three elements to succeed:
- The advisor is a competent professional with sufficient expertise
- The taxpayer provided all necessary and accurate information
- The taxpayer actually relied in good faith on the advice given
For penalties assessed on 2024 returns, or 2025 returns that were processed before AEP took effect, first time abate is still available but must be requested, so we may not be done sitting on hold with Practitioner Priority Services.
We won’t know what we don’t know.
When AEP is applied, the taxpayer will receive a notice letting them know that their penalties were abated. Will clients share these notices with us? Maybe, maybe not, but we recommend letting clients know about this change, and encouraging them to reach out if they receive one of these notices.
The new automatic exemption will make it easier for taxpayers who either don’t have a tax professional to assist them or simply didn’t know to ask for first time abatement to receive the relief to which they are entitled, even if it means fewer chances for practitioners to look like representation rockstars.