Tax season can bring a lot of pressure, especially when you are missing the documents you need to finish your federal individual income tax return. If April 15 is approaching and you are not ready, you do not need to panic. The IRS offers a simple solution to give you some breathing room.
Requesting an automatic extension by filing Form 4868 buys you extra time to file an accurate 2025 return. It pushes your filing deadline to October 15 and protects you from steep penalties. However, there is a massive catch that catches many taxpayers off guard.
An extension gives you more time to file your paperwork, but it does not give you more time to pay the government. You still need to estimate and pay any taxes you owe by April 15. Understanding how this works is the key to keeping more of your hard-earned money and avoiding unnecessary fees.
Filing Form 4868 before the April 15 deadline is a smart, strategic move if you are missing information. It prevents the IRS from penalizing you for a late return.
However, if you expect to owe money this year, you must project that amount and make a payment by April 15. Failing to pay what you owe on time triggers an entirely different set of penalties and interest charges. At SD Mayer, we highly recommend paying as much as you can by the original deadline to keep these extra costs as low as possible.
Accounting can seem complex, but we believe in explaining things clearly. When it comes to the IRS, penalties for missing the April 15 deadline generally fall into two categories.
The IRS punishes late paperwork harshly. If you fail to file your return or request an extension by April 15, the failure-to-file penalty kicks in. This fee is assessed at 5% of your unpaid taxes for every month (or partial month) your return is late.
This penalty caps out at a maximum of 25%. Additionally, if you file your 2025 return more than 60 days late, you will face a minimum penalty of $525. Filing an extension entirely prevents this costly fee, provided you submit your final return by October 15.
If you do not pay your taxes by April 15, you face the failure-to-pay penalty. This is calculated at a lower rate of 0.5% for each month or partial month your payment is late.
For example, if you pay your taxes on May 29, the penalty is generally 1% (0.5% multiplied by two partial months). Like the filing penalty, this fee caps at a maximum of 25%.
If you fail to file an extension and fail to pay your taxes, the IRS applies both penalties simultaneously. During the first five months, the combined penalty is 5% per month (a 4.5% failure-to-file fee plus a 0.5% failure-to-pay fee), capping at 25%.
After that, the failure-to-pay penalty continues to grow for up to 45 more months. Ultimately, your combined penalties can reach a staggering 47.5% of the original tax you owed. Putting off your taxes is an incredibly expensive mistake.
Even if you pay your balance by April 15, you might still encounter an underpayment penalty. This separate fee applies if you did not pay enough taxes throughout the year via withholdings or estimated quarterly payments. Furthermore, the IRS assesses interest on any unpaid tax balances. The interest rate equals the federal short-term rate plus three percentage points, and it applies in addition to any penalties.
There are a few exceptions to these rules. If you live outside the United States and Puerto Rico, or if you serve in the military outside these locations, you automatically receive a two-month filing extension without submitting a form. You must still pay any tax due by April 15. Finally, the IRS may waive penalties if your delay was due to "reasonable cause," such as a serious illness or death in the immediate family.
If you cannot pay your full tax bill this year, your best move is to file an extension to block the failure-to-file penalty. From there, pay whatever you can to reduce the failure-to-pay penalty. You might even qualify for an installment agreement, which can lower your penalty rate and prevent severe actions like tax liens.
Filing an extension is easy, but accurately estimating what you owe takes careful planning. That is exactly what we are here to help you do. At SD Mayer, we partner with you to make smart financial decisions that protect your bottom line. Contact our team today, and let us help you map out a clear, stress-free path forward.