The IRS is rolling out an automatic penalty relief process this summer, a shift that will let eligible taxpayers avoid filing a separate request when they miss certain filing or payment deadlines. The change will begin with original returns for tax year 2025 and with 2026 quarterly returns, then carry into future tax periods.
For Erin Collins, the move lands where the system has long failed the people most likely to need help. She said millions of Americans qualify for relief, but only about 220,000 taxpayers received waivers through the manual First Time Abate process in fiscal year 2025. If the automatic system had been in place over that same period, she estimated, more than 1.5 million taxpayers would have received penalty relief.
The new Automatic Exemption from Penalty process will apply only to eligible taxpayers who have a history of filing on time and paying any tax due in the three prior years, or in 12 consecutive quarters for quarterly returns. The IRS will grant the relief automatically and send a notice confirming it, which means taxpayers who qualify will not have to call, write or file a separate request to receive it.
That matters because late filing penalties can reach as much as 25% of unpaid tax, and even a modest charge can be painful for households already balancing rent, utilities, groceries, transportation or medical expenses. Collins said too many eligible taxpayers have missed first-time relief in the past because they did not know it existed, did not understand how to ask for it, could not get through to the IRS or had no tax professional to guide them. She said the change is especially important for low-income taxpayers and taxpayers who cannot afford representation.
There is still a limit to how far the automatic system reaches. Information returns and returns tied to specific transactions or infrequent events generally are not eligible, and that includes Form 706, U.S. Estate Tax Return, and Form 709 Gift Tax Return. The IRS is drawing a narrower line around routine compliance, not every filing that might carry a penalty.
That narrow line is what makes the broader change notable. Taxpayers who were late in the past had to ask the IRS to erase penalties, and the agency had to process those requests one by one. Frank Bisignano said people who historically pay on time should not have to make a formal request for relief that is routinely granted, while Glen Frost said the new process will end unneeded financial headaches for hundreds of thousands of taxpayers in the months ahead.
The practical payoff is as much about administration as it is about fairness. The IRS expects fewer phone calls and fewer written requests once eligible taxpayers no longer have to contact the agency for relief. For Collins, that is the real test of the change: automatic relief that reaches millions, rather than a manual process that left most of them outside the door.
