The IRS will abate Failure to Pay, Failure to File, and Failure to Deposit Penalties if a taxpayer meets the following criteria…
1 – You must have a clean compliance history.
2 – Your returns must have been filed timely with full payment of taxes for the past three years, or for the past 12 consecutive quarters for quarterly filers.
Under the current system, we must apply for penalty relief under the First Time Penalty Abatement (FTPA) System. This normally means that we call the IRS and request relief.
Which used to be an easy thing, back when the Service was answering the phone. Now, not so much. You can apply for it using a form.
In my business, there’s always a form.
The IRS is phasing out the current system and replacing it with a new Automatic Exemption from Penalty Program (AEP). Supposedly, if a taxpayer qualifies, this will happen automatically without a request.
This is not a minor procedural tweak. It changes how penalty relief will be delivered to millions of taxpayers.
It’s expected to begin phasing in this summer for tax year 2025 original returns and 2026 quarterly returns. Starting with returns having original due dates on or after Jan. 1, 2027, AEP will fully replace the old system.
Not every form qualifies. Information returns and one-off filings tied to specific transactions, such as Form 706 (Estate Tax) and Form 709 (Gift Tax), generally fall outside AEP. Those clients still need the old playbook.
The National Taxpayer Advocate’s Office (TAS) called this a “long-awaited taxpayer win,” and the numbers back that up. In fiscal 2025, roughly 220K taxpayers received FTPA relief through the manual system.
TAS estimates that if AEP had been in place, more than 1.5M taxpayers would have received relief automatically.
The transition runs through this summer, and FTPA does not disappear on July 8th. Some qualifying taxpayers will still receive penalty notices during the changeover, particularly on returns processed before AEP goes live.
I have difficulties believing that the Government will actually do this, because it will cost them billions. But I guess we’ll see.
Let me leave you with this…
Citing the increase in the cost of fuel, the IRS has set a higher standard mileage rate for operating an automobile for business for the remainder of 2026.
The revised standard mileage rates, effective beginning July 1st, are…
1 – 76 cents per mile for business, an increase from 72.5 cents,
2 – 23.5 cents per mile for medical and moving purposes, up from 20.5 cents per mile.
3 – The mileage deduction for charitable contributions is 14 cents per mile.
This means that we will have two separate mileage rates based on when the deductible miles were driven.
This isn’t an uncommon IRS Practice. We had the same situation a couple of years ago, when gas prices spiked mid-year.
Have a great weekend. It looks like it might be a nice one.
If you’re having problems with your accounting and tax work, please don’t hesitate to contact us. We’d love to help.
We’re all going to get through this. Let’s get through it together…
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Payroll Services, Accounting and Tax Work, Tax Planning, or Tax Representation, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
888-310-0300
www.AccountingSolutionsLtd.com
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