CP95(SP): The Companion Notice to the IRS Automatic Penalty Relief Notice

What the notice actually says

CP95(SP) tells you that the IRS reviewed the return named on the notice, confirmed it met the compliance history that Automatic Exemption from Penalty (AEP) requires, and did not assess a Failure to File or Failure to Pay penalty as a result. It is the companion notice to CP95, covering the same kind of account — an individual, Form 1040-series filer — under the same AEP rule.

The IRS says AEP needs no action from the taxpayer. A remaining balance, if any, would show up on a separate settlement notice.

What actually triggered the notice

Both notices rest on the same AEP test, and the IRS Procedural Update lists them together.

That test comes from Automatic Exemption from Penalty, which IRM Procedural Update SBSE-20-0626-0643 (June 17, 2026) created as IRM 20.1.1.3.3.2.5 — a subsection not yet in the published IRM on IRS.gov, which is why every mention of it here carries the update number (SBSE-20-0626-0643). Per ¶8 of that update, the test has two parts. First, you filed the same return type for each of the prior three years (or twelve consecutive quarters), or IRS records show no filing was required. Second, the IRS assessed no penalty of $1 or more in that window, except the estimated tax penalty, or it removed one only for reasonable cause or IRS error, not through AEP, First-Time Abate, or a tolerance waiver. Meet that, and the IRS's own system suppresses the Failure to File penalty (IRC §6651(a)(1)) or the Failure to Pay penalty (IRC §6651(a)(2) and (a)(3)) before either is ever charged.

What this notice does not cover

Like CP95, this relief covers exactly two penalty types for an individual return: filing late and paying late. It does not touch the tax itself, and interest keeps accruing on any unpaid balance regardless. It also does not reach any other penalty type your account might carry — the source is explicit that other penalty types can still be assessed even after this relief applies.

Internally, the marker is the same as CP95's: an unreversed TC 971 with Action Code 996 on your account. An unreversed TC 971 action code 996 shows AEP or a prior First-Time Abate grant (IRM Procedural Update sbse-20-0626-0643 ¶(12)), and it is what actually blocks future Failure to File and Failure to Pay assessments on that return. You do not need to check a transcript to trust CP95(SP) — the notice itself is the IRS's stated proof the relief already applied.

What people mistake CP95(SP) for

The obvious confusion is with CP95 itself — they are companion notices, not two different programs. Seeing references to "CP95" online while holding a letter marked "CP95(SP)" can read as a mismatch. It isn't; both notices report the same AEP relief.

It is also easy to mistake for the routine settlement notice issued alongside it, which covers any balance still due — the tax itself, or a penalty type this relief does not reach. CP95(SP) only explains why a penalty you might have expected is not part of that balance; it is not the notice that states the balance itself.

Where this rule comes from

The IRS announced AEP in IRS News Release IR-2026-83 (July 8, 2026), which does not name CP95(SP) specifically. The notice code itself comes only from the governing procedural update, IRM Procedural Update SBSE-20-0626-0643, which added IRM 20.1.1.3.3.2.5 and names CP95(SP) as the individual-account notice in the same sentence as CP95.

If you believe your return should have qualified for AEP but a penalty was charged anyway because of an IRS processing error, see What Happens if You Qualified for AEP but an IRS Error Blocked It. To check eligibility for AEP or another penalty-relief path directly, the Penalty Abatement Analyzer checks First-Time Abate and AEP together.

Common Questions