Tax penalties have become a reliable source of income for the U.S government. One little mistake can lead you to face Internal Revenue System (IRS) penalties which could have been avoided. These penalties can be so severe that it can make you to pay a large amount of money or even put you in jail. IRS knows that the taxes are complex and some people will always make mistakes on their taxes, and the IRS will always take off money from them.

Here are some tips which can help you to reduce or even prevent your IRS penalties:

Pay your taxes on time: The due date to pay off individual taxes is 15th April if you fail to pay your taxes on time, you will get hit with the failure to pay penalty. The failure to pay penalty is charged on April 16th and is a 0.5% per month. The IRS increases the penalty to 1% a month if the tax remains unpaid.

If you can't pay your tax in full, enter into instalment agreement: The failure to pay penalty gets reduced to .25% from .5% if you enter into instalment agreement to pay back your taxes. Try to work with IRS as they reward those people on their tax problems by charging them lower penalties. It is common for the people to fail in paying their full tax on time and the IRS has many mechanisms that help people to get back into full agreement with IRS.

File your taxes on time: Not filing your taxes on time is the worst thing to be done to rack up a huge penalty. For each month passing by, you owe your taxes and if you fail to file a tax return, the IRS will charge you 5% for the failure to file tax penalty. This failure will be maximized after 5 months to 25% total penalty. Many people ignore to file their taxes because they are unable to pay for the taxes they owe; this is the worst thing to be done because the failure to file penalty is 10 times higher than failure to pay penalty.

If you can't pay on time, file for an extension: If you are unable to file on time, you can file for a six month extension. One thing you should know that when you file for an extension to file, it does not mean that you get an extension to pay your taxes. You must pay at least 90% of the taxes owned by you by 15th April. If you failed to pay your taxes by 15th April and have filed for an extension, then you will be hit by the failure to pay penalty. The failure to pay penalty is quite less than the failure to file.

Remove penalties: If you are already hit by the penalties, you can have the removed through penalty abatement. The IRS will likely remove all the penalties, if you show them the “reasonable cause” for not paying or filing your taxes. The IRS removes 30% of the charged penalties every year.