IRS to Automatically Waive Late-Filing Penalties for Taxpayers with Three-Year Clean Record
The IRS is implementing the Automatic Exemption from Penalty (AEP) policy, which will automatically waive late-filing and payment penalties for taxpayers who have a three-year history of timely filings. Previously, such relief required manual requests to the IRS; now it will be applied without taxpayer action starting with returns beginning in 2025 and future years. The change aims to reduce administrative burdens on both taxpayers and the agency. Late filing penalties can reach up to 25% of unpaid taxes, so this policy could result in significant savings for eligible individuals. In recent years, only a fraction of those who qualified received relief due to lack of awareness or difficulty navigating the process. The IRS expects that by automating these waivers, more taxpayers will benefit without needing direct intervention. The AEP is not available to those with repeated late filings but still allows them to request penalty relief if they can demonstrate reasonable cause.
Topics: IRS late filings policy change tax penalties