Eligible taxpayers may receive automatic penalty relief

Taxpayers with a history of filing and paying on time may now have an easier path to receive penalty relief.

This summer, the IRS’s new Automatic Exemption from Penalty or AEP will replace the long-standing First Time Abate administrative relief. AEP is designed to eliminate the need to contact the IRS to request relief and reduce burden for those with a timely compliance history.

Eligibility
AEP applies to eligible original returns beginning with tax year 2025 and 2026 quarterly returns and future tax periods. Taxpayers qualify if they have a history of filing on time and paying any tax due in the previous 3 years (or 12 consecutive quarters for quarterly returns). When eligible, penalties are not assessed during processing for:
•Failure to file
•Failure to pay
•Failure to deposit

Eligible taxpayers do not need to take action to receive this relief. If the IRS applies AEP, the taxpayer will receive a notice that the relief was granted. Not all returns are eligible for AEP. Some returns like ones filed only in response to specific transactions or infrequent events (such as Form 706, U.S. Estate Tax Return or Form 709 Gift Tax Return) generally are not eligible.

As First-Time Abate phases out and transitions to AEP, some qualifying taxpayers may still receive penalty notices for eligible tax year 2025 and 2026 quarterly returns. Taxpayers who believe they qualify may contact the IRS to request First Time Abate during this transition. AEP will replace First Time Abate for eligible returns with original due dates on or after Jan. 1, 2027. Please visit Administrative penalty relief for more information.

Other penalty relief options
Taxpayers who do not qualify for AEP may still request penalty relief based on reasonable cause and they will be notified of the outcome. See Penalty relief for reasonable cause for more information. While AEP prevents the assessment of certain penalties, taxpayers must still pay any tax and interest due, as well as any penalties not eligible for relief.

(Source of quote)
IRS Tax Tip 2026-59, July 30, 2026

Important steps for future business owners

Thinking of starting a business? One of the most important first steps for new entrepreneurs and future business owners is to ensure the right business structure is chosen. That’s not all though, there’re a few other tips and best practices for those starting out. Let’s take a look.

Choose a business structure

Each business structure has different tax filing requirements and legal considerations. Knowing the difference between them can help determine which option is best.

The most common are:

•Sole proprietorship: An unincorporated business owned by an individual. There's no distinction between the taxpayer and their business.
•Partnership: An unincorporated business with ownership shared between two or more people.
•Corporation: Also known as a C corporation. It's a separate entity owned by shareholders.
•S corporation: A corporation that elects to pass corporate income, losses, deductions and credits through to the shareholders.
•Limited liability company: A business structure allowed by state statute.

Choose a tax year

A tax year is an annual accounting period for keeping records and reporting income and expenses. A new business owner must choose either:

•Calendar year: 12 consecutive months beginning January 1 and ending December 31.
•Fiscal year: 12 consecutive months ending on the last day of any month except December.

(Source of quote)
IRS Tax Tip 2026-46

Got mail from the IRS? Don’t toss it

Some taxpayers may get mail from the IRS. It’s important that they open any mail they receive and read it carefully.

Most letters or notices are about federal tax returns or tax accounts. Each notice will outline the specific issue and include steps the taxpayer needs to take. A notice may reference changes to a taxpayer's account, taxes owed, a payment request or a specific issue on a tax return or credit.

Review the information. If the mail is about a changed or corrected tax return, the taxpayer should review the information and compare it with the original return. If the taxpayer agrees, they should make notes about the corrections on their personal copy of the tax return and keep it for their records. Typically, a taxpayer will need to act only if they don't agree with the information, if the IRS asked for more information or if there’s a balance due.

Take any requested action. This may include making a payment. The IRS and authorized private debt collection agencies do send letters by mail. Taxpayers can also view digital copies of select IRS notices by logging into their IRS Online Account. The IRS offers several options to help taxpayers struggling to pay a tax bill. Taking prompt action could minimize additional interest and penalty charges.

Reply only if needed. Taxpayers don't need to reply to a notice unless specifically told to do so. If a taxpayer needs to call the IRS, they should use the number in the upper right-hand corner of the notice and have a copy of their tax return and letter.

Let the IRS know of a disputed notice. If a taxpayer doesn't agree with the IRS, they should follow the instructions in the notice to dispute what the notice says. The taxpayer should include information and documents for the IRS to review when considering the dispute.

Keep the letter or notice for their records. Taxpayers should keep notices or letters they receive from the IRS for three years from the date the tax return was filed. These include adjustment notices.

Watch for scams. The IRS will never contact a taxpayer using social media. The first contact from the IRS usually comes in the mail.

(Source of quote)
IRS Tax Tip 2026-39, May 12, 2026