IRS Replaces Manual Penalty Waiver Process with Automatic Relief for 1.5 Million Eligible Taxpayers
Starting with tax year 2025 returns, the IRS will automatically suppress failure-to-file, failure-to-pay, and failure-to-deposit penalties for taxpayers with a clean three-year compliance history, requiring no action from the taxpayer. The change replaces the First Time Abate program, which reached roughly 220,000 taxpayers annually through a manual request process; the National Taxpayer Advocate estimates the automated system will reach seven times as many. Interest on unpaid balances continues to accrue, accuracy-related and fraud penalties are unaffected, and the IRS has not yet specified which notice code will confirm when the relief has been applied.