Quick overview

Tax filing deadlines set when federal (and often state) income tax returns must be submitted. Missing the deadline can trigger two distinct financial consequences: a failure-to-file penalty and a failure-to-pay penalty. Filing an extension gives you more time to submit a complete return, but it does not stop the IRS from charging interest or late-payment penalties on taxes you owe.

In my practice advising individuals and small businesses, the most common mistake is assuming a filed extension eliminates the need to pay on time. That belief causes avoidable penalties.

How extensions work (step-by-step)

  1. File Form 4868 for individuals. The IRS Form 4868 grants an automatic six-month extension to file federal individual returns, moving a typical April deadline to October (for example, April 15 → October 15) when that extension is timely submitted. You can e-file Form 4868 or mail it; electronic filing is faster and gives immediate confirmation (About Form 4868, IRS).
  2. Extensions are generally automatic for filing only. The extension applies to the time to file, not to pay. If you expect tax due, estimate and pay as much as you can by the original deadline to reduce penalties and interest (When to File Your Taxes, IRS).
  3. Payment methods. Pay online through IRS Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or by card when you file Form 4868 electronically. Record the confirmation number and keep it with your tax records.
  4. State rules differ. Many states accept the federal filing extension but some require a separate state extension form or payment. Verify your state revenue department’s rules before relying on a federal extension.

(For detailed steps on completing Form 4868 and the pros and cons of choosing an extension, see When to Use Form 4868: Filing an Extension Correctly and Filing Extensions vs. Payment Extensions: What Taxpayers Need to Know.)

What an extension does and does not do

  • Does: give additional time (usually six months) to prepare and file your federal tax return.
  • Does not: extend the deadline to pay taxes owed; stop interest from accruing; eliminate penalties for underpayment.

If you file for an extension but do not pay the tax due, the IRS will assess a failure-to-pay penalty plus interest from the original due date until you pay in full.

Penalties and interest — the typical rules (IRS rules as of 2025)

  • Failure-to-file penalty: Generally 5% of the unpaid tax for each month or part of a month that a return is late, up to a maximum of 25% of unpaid tax. If your return is more than 60 days late, there is a minimum penalty that may apply (see IRS guidance for the current dollar amount) (Penalties, IRS).
  • Failure-to-pay penalty: Typically 0.5% of the unpaid tax for each month or part of a month after the due date, up to 25% of the unpaid tax. If you have both penalties in the same month, the failure-to-file penalty is reduced by the failure-to-pay amount for that month (making the combined monthly penalty generally 4.5%)—but the failure-to-file penalty is usually larger and therefore more costly.
  • Interest: The IRS charges interest on any unpaid tax from the due date of the return until paid. Interest rates are set quarterly and are the federal short-term rate plus a statutory amount; interest compounds daily (IRS — Interest on Underpayments).

These rates and minimums change periodically; always confirm current penalty and interest figures on IRS.gov.

Common triggers that lead taxpayers to request extensions

  • Missing records (investment forms, K-1s, business expense documentation)
  • Major life events (illness, death in the family, natural disaster)
  • Complex returns (multiple income sources, international reporting, estate matters)
  • Business filing obligations that differ from individual deadlines (partnerships and S-corporations have other filing dates)

Special circumstances: disaster relief or military service in combat zones can alter deadlines. The IRS posts emergency relief announcements that automatically extend deadlines for affected taxpayers—read the announcements and follow the documentation instructions closely.

Real-world examples (illustrative)

  • Freelance graphic designer: Filed Form 4868 because some 1099s arrived late. Paid an estimate on April due date and filed in June. Outcome: avoided failure-to-file penalty and limited failure-to-pay exposure.
  • Partnership that missed both filing and payment: Did not file an extension or pay; faced both penalties plus interest. After consulting a tax advisor, they requested penalty abatement for reasonable cause and entered a payment plan to stop further accrual of collections actions.

These examples show two lessons: file the extension on time and pay what you can by the original deadline.

How to minimize penalties and protect cash flow

  • Estimate and pay taxes by the original due date even if you file an extension. Paying reduces both penalties and interest.
  • Use IRS payment options: Direct Pay (no fee), EFTPS (best for scheduled payments), or a payment card (may carry processing fees) (IRS Payments).
  • If you can’t pay in full, apply for an IRS installment agreement promptly to reduce the failure-to-pay penalty rate (and avoid collection enforcement) or consider an Offer in Compromise only after speaking with a tax advisor.
  • Keep documentation that supports reasonable-cause requests (medical records, death certificates, disaster documentation). The IRS may abate penalties for reasonable cause or first-time penalty abatement in qualifying situations (Penalty Relief, IRS).

Common mistakes and misconceptions

  • Mistake: believing a filing extension equals a payment extension. Reality: you still owe tax by the original due date.
  • Mistake: waiting until after the deadline to request an extension. Form 4868 must be submitted by the original filing date.
  • Misconception: you can get multiple routine federal extensions. The IRS’s Form 4868 is generally a single automatic six-month extension; further extensions are rare and usually tied to disaster or service-related relief.

What to do if you’ve already missed a deadline

  1. File your return immediately to stop the failure-to-file penalty from growing.
  2. Pay as much as you can to reduce interest and penalties.
  3. If you’ve got a reasonable excuse, gather evidence and request penalty abatement or first-time penalty relief. Contact the IRS or a tax professional for representation if needed.

When to involve a professional

Complex returns (foreign income, multiple businesses, large K-1s), collection notices, or requests for penalty relief are situations where professional help pays for itself. In my practice I see the best outcomes when clients engage a CPA or enrolled agent early—especially before notices escalate to liens or levies.

Useful internal resources

  • For help completing an extension form correctly, see When to Use Form 4868: Filing an Extension Correctly (FinHelp) — provides a step-by-step on the form and electronic options.
  • To compare filing vs payment extensions and their consequences, see Filing Extensions vs. Payment Extensions: What Taxpayers Need to Know (FinHelp).

Final checklist before an extension or late filing

  • File Form 4868 by the original due date (if needed).
  • Pay an accurate estimate of tax due by the original due date.
  • Save confirmation numbers and proof of payment.
  • Check state filing rules for separate extension or payment requirements.
  • Keep clear records to support any reasonable-cause claims.

Professional disclaimer: This article is educational and not individualized tax advice. Tax law and IRS procedures change; consult a qualified tax professional for guidance tailored to your situation.

Authoritative sources

If you want, I can adapt this guidance into a short printable checklist or a timeline you can follow during tax season.