Tax Extensions: Why You Still Need to Pay on Time

If You Get an Extension, You Should Still Pay Your Taxes ASAP

An extension moves the tax return due date, but surprisingly, it doesn't change the due date for your tax payment. To avoid interest and penalties, you should pay your taxes on time and file the return as soon as possible.

To get guidance now, use TaxCure to find a tax professional, or keep reading – this blog outlines what you need to know about the extended tax deadline and how it impacts your payments due.

Key takeaways

Filing extension – You can get six extra months to file if you request an extension.
Payment due date – The tax is due on the original return due date, even with an extension.
Penalties – The IRS assesses late payment and late filing penalties.
Benefits of extension – You avoid late filing penalties but may incur late payment penalties if applicable.
How to minimize penalties – File an extension, make a full or partial payment, and set up payment arrangements on the remaining balance.

What is a filing extension?

An IRS extension gives you six extra months to file your tax return. Once you make the request, acceptance is automatic. Most states grant you an automatic extension if you request a federal extension, but check the laws in your state to see if you need to file an extra form.

Individual tax returns are due April 15, but the extended deadline is October 15th or the next business date. Corporate and partnership returns are due March 15th, with an extended due date of September 15th or the next business day.

To request an extension, file Form 4868 for individual tax returns, file Form 7004 for business tax returns, or just let your tax preparer know and they'll file this form for you.

When are tax payments due?

Your payments are still due on the original due date – even if you request an extension. The due date is April 15th for individual income tax and March 15th for corporate income tax. To minimize penalties and interest, pay the amount you think you owe by the original deadline. If you overpay, you can get a refund.

Penalties for filing or paying late

The penalties for paying late are much lower than the penalties for filing late – that's why you should always get an extension if you're going to file late, regardless of when you think you'll pay the tax due.

Failure-to-pay penalty

The failure to pay penalty is 0.5% of your tax due every month you are late. It starts on the due date even if you have an extension, and can get up to 25% of the balance. For instance, say that you owe $10,000 on April 15th, but you don't pay until October 15th. You will incur a penalty of $300 for paying six months late.

Failure to file penalty

The failure to file penalty is 10x the amount of the late payment penalty. It's 5% of the tax due per month and can get up to 25%. This penalty applies if you file late, but you can avoid it by requesting an extension.

For instance, say that you owe $10,000 and you file in October but you don't have an extension. At this point, because you are more than five months late, you will incur the full 25% penalty of $2500. In contrast, if you had an extension, you would not incur this penalty as long as you filed by the October 15 extended deadline.

Interest on unpaid taxes

In addition to penalties, you will also incur interest on your unpaid balance. The IRS interest rate is the federal short-term rate plus three, and as of quarter one of 2025, it's 7%. Interest applies any time you owe tax, whether you're ignoring the bill or making monthly payments on a pre-arranged payment plan.

Scenarios: how penalties apply when you file late

To help you understand why you should request an extension even if you can't afford to pay on time, consider the following scenarios:

Filing and paying late without an extension

If you owe $10,000, file and pay three months late, and don't have an extension, you'll incur the following penalties:

Failure to file penalty: $10,000 * 4.5% * 3 months = $1350
Failure to pay penalty: $10,000 × 0.5% × 3 months = $150
Interest: $10,000 * 7% APR * 3 months $176.45
Total due: $11,676.45

Note that the failure to file penalty drops to 4.5% during months where the failure to pay penalty is .5%. This allows the total monthly penalty to be capped at 5%. The interest rate is subject to change, and it compounds daily. The interest will also be slightly higher than noted above as it accrues on the penalties as well.

Filing an extension but paying late

Now, let's consider the same scenario of a taxpayer owing $10,000, but with an extension. Like the above scenario, the taxpayer is filing and paying three months late, but they have an extension:

Failure to file penalty: not applicable
Failure to pay penalty: $10,000 × 0.5% × 3 months = $150
Interest: $10,000 * 7% APR * 3 months $176.45
Total due: $10,326.45

As you can see, you save over $1000 in this scenario, just by requesting the extension.

Making a partial payment and filing and paying late without an extension

Now, what happens if you pay half of your $10,000 tax liability by April 15th, but don't file the return or pay the remaining balance for three months?

In this case, the interest and penalties only apply to the remaining balance as follows:

Failure to file penalty: $5,000 * 4.5% * 3 months = $675
Failure to pay penalty: $5,000 × 0.5% × 3 months = $75
Interest: $5,000 * 7% APR * 3 months = $88.36
Total due: $5838.36

Compared to filing and paying late without an extension, you've saved yourself about $500 just by making the partial payment. However, because you didn't request an extension, the penalties are still more than they would have been if you requested an extension but didn't make a partial payment.

Making a partial payment and paying late with an extension

In contrast, if you pay $5000 by April 15th, file an extension, and pay the remaining amount when you file three months later, you will see the following penalties and interest

Failure to file penalty: not applicable
Failure to pay penalty: $5,000 × 0.5% × 3 months = $75
Interest: $5,000 * 7% APR * 3 months = $88.36
Total due: $5163.36

As you can see, this scenario has the lowest interest and penalties, and it saves you a substantial amount compared to the other scenarios. The best option, whenever possible, is to file an extension and pay as much as you can by the original due date.

What if you don't owe? Should you still file on time?

Ideally, yes, you should file on time, but if you file late, you have three years to claim your tax refund. The IRS also pays you interest if you claim a refund late.

What about filing state taxes late?

Most states give you an automatic extension if you request a federal extension, but again, this just extends the filing deadline. It doesn't extend the due date for the payments. Every state charges different penalties for late payments or filing late.

How to minimize penalties and interest if you can't file on time

To keep the penalties as low as possible, consider these tips:

Request an extension – This helps you avoid hefty late filing (failure to file) penalties. As long as you file by the extended deadline, you will save about $2500 for every $10,000 owed – for instance, if you owe $100,000, you'll save $25,000.
Pay as much as possible by April 15 – If you pay the full tax due, you won't incur any penalties, but any amount you pay will help to reduce the interest and penalties.
Make payment arrangements – if you set up an IRS-approved payment plan, you will minimize penalties and avoid collection actions. For instance, if you set up an installment agreement, the IRS will not try to involuntarily collect the debt, and they will drop the late payment penalty to .25% of the balance owed per month.
Request penalty relief – The IRS will abate late payment and late filing penalties if it's the first time you've been late in the last few years. They'll also remove penalties if you had reasonable cause (illness, death, disaster, loss of records, etc) for filing or paying late.

Frequently Asked Questions (FAQs)

Does a tax extension also extend the time to pay my taxes?

No, an extension only gives you extra time to file. It doesn't change the due date for your tax return. However, filing an extension helps to reduce the penalties you face, even if you do pay late.

What happens if I can’t pay my taxes by the deadline?

The IRS will assess penalties and interest, and eventually, the agency may try to collect the tax debt involuntarily. However, the IRS offers many different payment plans and relief options to help taxpayers who are struggling.

What if I just need a little extra time to pay?

The IRS has a variety of short-term payment plans. For instance, if you owe less than $100,000, you can request an extra 180 days online. These arrangements help to reduce penalties and avoid unwanted collection actions.

How do I estimate what I owe when filing an extension?

Use last year's tax liability to estimate how much you owe, or use the worksheet on Form 1040ES to help you estimate your tax due for the year. Your accountant should also be able to give you a rough estimate of how much you're likely to owe if you have general info about your income, tax credits, and dependents.

Are there penalties if I file late but don’t owe anything?

No, for individual income tax returns, there are no penalties if you file late but don't owe. However, for business informational returns such as S-corp or partnership returns, there are late filing penalties, even though there are no payments due with these returns.

Can I remove penalties if I filed late due to hardship?

Possibly. The IRS doesn't offer hardship penalty waivers, but the agency offers first-time and reasonable cause penalty abatement. Additionally, if you need more time due to hardship, you can request relief by filing Form 1227 (Tax Payment Extension Due to Hardship).

Get Help With Filing Late Taxes and Dealing With Late Payments

Being behind on tax filing and payments can be very stressful – especially if the IRS is assessing interest and penalties on your account. The good news is that there is a solution, and TaxCure is here to help you find a trustworthy, experienced tax professional.

Start your search on Taxcure today and use the filters to narrow down the results to find a pro with the experience you need. You can also filter the results by state to find a pro who has experience filing returns and dealing with late tax payments in your state.