AEP Is Automatic. Your Notice Workflow Still Needs an Owner.

According to the IRS, on July 8, 2026, the agency announced the Automatic Exemption from Penalty (AEP), an automatic penalty-relief process it said was expected to begin in summer 2026 and that applies starting with eligible tax year 2025 returns and eligible 2026 quarterly returns, and extends to subsequent and future eligible periods as they become eligible. AEP replaces First-Time Abate (FTA) for eligible returns with original due dates on or after January 1, 2027. For a small tax office, the practical question isn't whether AEP exists — it's what happens in the office when a penalty notice still arrives.

What AEP Actually Does

• AEP applies automatically starting with eligible tax year 2025 returns and eligible 2026 quarterly returns, and its coverage extends to subsequent and future eligible periods; the initial 2025/2026 returns are the starting point, not the full scope.
• Eligibility depends on a compliance lookback covering the prior 3 years or 12 quarters, depending on the return type, based on a record of timely filing and timely payment.
• AEP replaces First-Time Abate (FTA) for eligible returns with original due dates on or after January 1, 2027 — a separate milestone from AEP's initial application to eligible tax year 2025 returns and eligible 2026 quarterly returns.
• AEP can apply to certain failure-to-file, failure-to-pay, and failure-to-deposit penalties when the return and lookback conditions are met.
• When AEP is applied, the IRS sends a notice confirming the relief.
• No action is required from the taxpayer only in that specific case — when AEP has actually been applied and confirmed by notice.

What AEP Does Not Do

• Does not eliminate unpaid tax or interest.
• Does not apply to penalties outside AEP's eligibility rules; not every penalty type is covered.
• Transaction-based or infrequent-event returns are generally not eligible.

The IRS states that during the transition, some qualifying taxpayers may still receive penalty notices for eligible tax year 2025 returns or eligible 2026 quarterly returns. Taxpayers who believe they qualify may contact the IRS to request First-Time Abate (FTA) for those returns.

Why "Automatic" Still Needs an Owner

Every notice that reaches a small office needs someone to open it, read it, and decide what happens next — not because AEP failed, but because AEP is narrow by design: an eligible tax year 2025 or 2026 quarterly return — and subsequent or future eligible periods as AEP's coverage continues — a lookback showing timely filing and timely payment, and a penalty type inside its scope. A notice sitting outside any one of those conditions still needs review and handling on its own terms. Treating every notice as automatically resolved is exactly the failure that AEP does not protect against.

A Notice-Intake Workflow (Not an Eligibility Determination)

The following fields are for tracking a notice through the office — not for deciding whether AEP applies. Recording them doesn't establish eligibility for relief, doesn't confirm the compliance lookback, and doesn't guarantee any outcome.

1. Return type

2. Tax period

3. Original-return status

4. Compliance lookback window the return falls within, for internal tracking only — not stated on the notice or return itself

5. Penalty type

6. Notice date

7. Notice amount

8. Response instruction printed on the notice

9. Owner in the office

10. Next action

11. Last contact date

Using This Table Day to Day

Not every notice needs the same handling, and not every notice needs a response at all — some are informational. What every notice needs is an owner and a documented next step, so the office can show, weeks later, what was known and when. Keep this log inside your practice management workflow, not in a public tool, since notices carry taxpayer-specific numbers, dates, and identifying information.

Where Intaxion Fits

Intaxion supports intake and organizing incoming notices for office review by the taxpayer's preparer; it does not determine AEP eligibility, does not provide tax advice, and does not prepare or file returns. Confirming whether a specific penalty was actually resolved by AEP is a determination for the taxpayer's preparer or the notice itself, not for this workflow.

For a first, cautious look at recognized notice codes before a full review, use the Notice Decoder: https://www.intaxion.com/tools/notice-decoder. The tool is a starting point for organizing what a notice says — not a substitute for a preparer's review.

Sources

• IRS Newsroom: https://www.irs.gov/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers
• IRS Administrative Penalty Relief: https://www.irs.gov/payments/administrative-penalty-relief

Sources

• https://www.irs.gov/es/newsroom/irs-simplifies-penalty-relief-introduces-automatic-process-for-eligible-taxpayers

• https://www.irs.gov/es/payments/administrative-penalty-relief

• https://www.intaxion.com/es/herramientas/decodificador-avisos-irs