When Are Taxpayers Eligible for Penalty Relief from the IRS (and What Are the Risks)?

Taxpayers who are behind on their federal filing and payment obligations may be eligible for penalty relief from the IRS—including automatic penalty relief in some cases. However, penalty relief does not absolve taxpayers of other payment obligations, and applying for it can be risky in certain scenarios. As a result, taxpayers considering penalty relief should consult an experienced Virginia IRS lawyer before doing so.

The IRS announced a new penalty relief program in 2026. The IRS’ new Automatic Exemption from Penalty (AEP) program is replacing its long-standing First Time Abatement (FTA) program for eligible returns due on or after January 1, 2027, and certain returns due as far back as 2024 are eligible for AEP as well. However, taxpayers will still need to apply for penalty relief in some cases—and some taxpayers will need to consider other alternatives. Learn more from Virginia IRS lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:

When Are U.S. Taxpayers Eligible for Penalty Relief?

Taxpayers may be eligible for penalty relief from the IRS in various circumstances. The IRS’ new AEP program provides automatic relief to eligible taxpayers who have met their filing and payment obligations for the previous three years. However, taxpayers who are not eligible for AEP may still be eligible for cause-based penalty relief—including relief based on “reasonable cause” and innocent spouse relief, among other forms.

What Are the Risks Associated with Filing for Penalty Relief?

When taxpayers are not eligible for AEP, the risks of filing for penalty relief involve disclosing tax law violations to the IRS. Filing for penalty relief does not guarantee protection from civil or criminal enforcement. As a result, taxpayers considering penalty relief must make sure it is their best option—and they should consult experienced tax counsel to determine whether to consider alternatives, such as making a voluntary disclosure.

How Our Law Firm Can Help

Our firm provides experienced legal representation for taxpayers who are behind on their federal filing and payment obligations. If you need to come into compliance, we can:

• Assess your eligibility for penalty relief from the IRS;
• Assess your other options for coming into compliance (including voluntary disclosure);
• Prepare and file an appropriate request or disclosure on your behalf;
• Communicate with the IRS on your behalf as it considers your request or disclosure; and
• Use our experience to help you target a favorable resolution that avoids unnecessary liability.

The IRS regularly conducts audits and investigations focused on uncovering noncompliance; and, once an audit or investigation is underway, certain options go off the table. With this in mind, if you have concerns about your federal tax liability, we strongly recommend seeking legal advice promptly.

Discuss Your Options with Virginia IRS Lawyer Kevin E. Thorn in Confidence

If you would like to discuss your options in confidence, we encourage you to get in touch. Call 703-752-3752 or contact us online to schedule a confidential consultation with Virginia IRS lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group.