IRS will automatically wipe late-filing penalties up to 25% for taxpayers with a 3-year clean record

The Internal Revenue Service is making it a bit less onerous for some people who are late paying their taxes.

The IRS will automatically waive fines tied to late filing or payment of taxes for taxpayers who have a history of being on time. The policy, called the Automatic Exemption from Penalty (AEP), streamlines the process of penalty relief.

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People with a history of being timely with their IRS filings and payments historically could avoid any fines if they were making a delayed payment/filing, but had to make a separate appeal to the IRS to do so. Now, it's being done automatically, which will reduce the burden on taxpayers and lower the strain on IRS resources.

"Automatic Exemption from Penalty reflects the IRS' commitment to making the payment of taxes owed simpler and more consistent," said IRS Chief Executive Officer Frank J. Bisignano in a statement. "By automatically applying penalty relief, the IRS recognizes that taxpayers who historically pay on time should not have to make a formal request for relief that is routinely granted."

The new rules go into effect for returns beginning in 2025, as well as any 2026 quarterly returns. It's an open-ended policy, so will remain in effect for future years as well.

Penalties will not be assessed during processing for failure to pay, failure to file or failure to deposit.

If you've got a regular history of filing late or making late payments, however, you're ineligible for the AEP. You may, however, still request relief from penalties if you can show a reasonable cause. (It just won't be automatic.)

So what qualifies as a history of regular payments? The IRS says people who have filed returns on time and paid any taxes due in the three prior years (or last 12 consecutive quarters) are eligible for the automatic relief.

Foregoing those penalties isn't just a savings of a few dollars. Late filing penalties can be as high as 25% of your unpaid tax bill. And late payment and deposit penalties accrue over time.

The automatic waving should result in massive total savings. USA Today reports last year only 220,000 taxpayers received penalty waivers, though more than 1.5 million were eligible.

"For years, too many eligible taxpayers missed out on first-time penalty relief simply because they did not know it was available, did not understand how to request it, could not get through to the IRS, or did not have a tax professional advising them," Erin Collins, the National Taxpayer Advocate, told the paper.

Even people who don't qualify could see some benefits.

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With agents freed up from processing these requests, it could be a little easier to reach one with questions about your tax bill.

This article originally appeared on Moneywise.com under the title: IRS will automatically wipe late-filing penalties up to 25% for taxpayers with a 3-year clean record

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.