IRS 2026 Update: Is Your Penalty Removal Now Automatic?

The IRS has quietly rolled out a significant change for the 2026 tax season: Automatic First-Time Abatement (FTA). For many taxpayers, this means that those frustrating failure-to-file or failure-to-pay penalties might now disappear without a phone call, a letter, or a stressful wait.

This is a game-changer for penalty relief, but there are crucial details you need to know to ensure you benefit.

What is First-Time Abatement (FTA)?

For years, the IRS has offered FTA as an administrative waiver. If you had a clean record (no prior penalties) for the preceding three years and were otherwise compliant, the IRS would generally waive a single failure-to-file or failure-to-pay penalty upon request. It was a lifeline for taxpayers who made an honest mistake.

The Big News for 2026: FTA Just Got Automatic

Historically, you had to actively ask for FTA. You'd call the IRS, navigate phone trees, and patiently explain your situation. For 2026, the IRS has updated its systems to automatically identify and apply FTA to eligible accounts.

This means:

• No More Phone Calls (Potentially): If you meet the criteria, the penalty should be removed automatically.
• Faster Resolution: You won't have to wait for an agent to review your request.
• Reduced Stress: A significant burden lifted without you even having to lift a finger.

Do You Qualify for Automatic FTA in 2026?

While the process is automatic, the eligibility criteria remain the same:

1. Clean Penalty History: You must not have incurred any penalties (except estimated tax penalties) for the three tax years prior to the year for which you’re requesting abatement.
2. Current Filings: You must have filed (or filed an extension for) all required returns.
3. Paid or Arranged to Pay: You must have paid, or arranged to pay, any tax due. If you're on an Installment Agreement, that counts as arranging to pay.

Example: If you incurred a failure-to-file penalty for your 2025 tax return (due April 15, 2026), the IRS will check your 2022, 2023, and 2024 tax years. If those years are penalty-free and you've filed all necessary returns, the 2025 penalty should be automatically removed.

What If Your Penalty Isn't Automatically Removed?

The IRS systems are sophisticated, but no system is perfect. If you receive a penalty notice for 2026 and believe you meet the FTA criteria but the penalty isn't automatically removed, don't despair.

You still have the right to request FTA manually. You can:

• Call the IRS: Use the phone number on your penalty notice. Be prepared to explain your clean history.
• Mail Form 843, Claim for Refund and Request for Abatement: Clearly state "First-Time Abatement" as your reason.

Beyond FTA: Other Penalty Relief Options

Even if you don't qualify for FTA (perhaps you've had penalties in the past three years), you might still qualify for abatement due to Reasonable Cause. This typically applies to situations where you acted with "ordinary business care and prudence" but were still unable to comply due to circumstances beyond your control, such as:

• A serious illness or death in your immediate family.
• A natural disaster (e.g., severe 2026 weather events).
• Inability to obtain necessary records.

This type of relief almost always requires a written request with supporting documentation.

Don't Let Penalties Accumulate, Take Action!

The new Automatic FTA program for 2026 is a welcome change, streamlining relief for many. However, understanding the rules and knowing when to act is still crucial. Always open any IRS notices you receive.

If you have questions about whether you qualify for automatic relief, if a penalty has been incorrectly applied, or if you need assistance pursuing Reasonable Cause abatement, contact a qualified tax professional. Early action is key to preventing tax penalties and interest from spiraling out of control.