A penalty is on the account. Which door removes it?

Pick the relief that fits your return before you write a reasonable-cause letter. The Analyzer below tells you which one applies. There are three doors off a penalty. The Automatic Exemption from Penalty (AEP) asks nothing of the taxpayer when it applies; First-Time Abate (FTA) is an administrative waiver that works once per clean three-year history; and reasonable cause is the door that requires an actual factual argument. IRM 20.1.1.3 ¶(1) lists four categories of relief that the IRS considers in order: correction of IRS error, statutory and regulatory exceptions, administrative waivers, and reasonable cause. It does not mention AEP, which comes from the Procedural Update.

The doors change on January 1, 2027: for eligible returns due on or after that date, AEP replaces First-Time Abate (IRM Procedural Update SBSE-20-0626-0643), which leaves AEP and reasonable cause for those returns. For returns AEP does not list, such as Form 1041, the update does not say in terms what happens to First-Time Abate after 2026. The IRM text for First-Time Abate still stands, so request it and check the IRS position. The doors that remain depend on the return type. Knowing which door a specific penalty is even eligible for, before spending time building a reasonable-cause argument a return didn’t need, is most of what this hub is for.