The IRS plans to begin granting first-time penalty abatement automatically, without a taxpayer request, for returns filed late starting with the 2025 tax year, National Taxpayer Advocate Erin Collins said on November 24, 2025, at the AICPA's national tax conference, The Tax Adviser reported. Collins said about 1 million taxpayers qualify for the relief each year but do not know they must ask for it. The change removes a step that has quietly cost filers money for years.
What changed
First-time abatement, often shortened to FTA, is an administrative waiver the IRS has long offered to taxpayers with a good compliance history. Until now it has largely been described in the Internal Revenue Manual, the agency's internal procedures, and granted when a taxpayer or preparer asked for it by phone or in writing. According to The Tax Adviser, the IRS has built account markers that track a taxpayer's three-year history, which lets its systems identify eligible filers without manual review.
Under the new approach, qualifying taxpayers will receive a letter explaining that the penalty has been waived and describing what they need to do to stay eligible in future years. The report said the qualifying test is the absence of unreversed penalties in the prior three tax years, other than estimated tax penalties. Collins said most of the taxpayers who qualify but never ask are lower-income.
Who is affected
The initial focus, as reported, is penalties on late-filed returns beginning with the filing season that opens in 2026. That group includes plenty of affluent households: filers waiting on late K-1s from partnerships, executives with complex equity compensation, business owners with messy year-end books and families dealing with a death or divorce. The IRS page on first-time abatement describes eligibility in terms of filing all currently required returns and paying, or arranging to pay, any tax due, so taxpayers with open compliance problems may still fall outside automatic relief.
The after-tax math
For filers who owe a large balance, the failure-to-file penalty generally grows much faster than the penalty for paying late, which is why a missed filing deadline on a big bill is expensive. Abatement removes the penalty itself; interest on the unpaid tax still runs.
Example, with round numbers: a couple sells a rental property and owes $80,000 with their 2025 return. They file three months late and pay in full when they file. Suppose the filing and payment penalties together come to $10,000, before interest.
| Scenario | Penalty owed | What they had to do |
|---|---|---|
| Old process, no request made | $10,000 | Nothing; penalty stands |
| Old process, FTA requested | $0 if granted | Call or write the IRS, or have a preparer do so |
| New automatic process | $0 if eligible | No request; letter arrives |
The $10,000 figure is illustrative; actual penalties depend on the balance, the length of the delay and IRS computation rules. The broader point is that relief that once required knowing to ask is set to become the default for eligible filers.
Moves to discuss with your advisor
- Whether a household has any unreversed penalties from the prior three years that would disqualify it from automatic relief.
- Why using a one-time waiver on a small penalty could matter later, since an abatement becomes part of the three-year history the IRS reviews.
- Whether reasonable-cause relief, which does not depend on a clean history, fits a situation better than first-time abatement.
- How extensions, which avoid the late-filing penalty but not interest on unpaid tax, fit into planning for returns with late tax documents.
What to watch
The IRS has not yet published formal guidance describing the automatic process, the letters taxpayers will receive or whether relief will extend to late-payment and deposit penalties. Details are likely to emerge before the 2026 filing season, and preparers will want to see how the automatic waiver interacts with requests already pending.
Sources
- First reported About 1 million taxpayers to get automatic penalty relief next year — The Tax Adviser (AICPA)
- Penalty relief due to First Time Abate or other administrative waiver — IRS
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