Quick answer: An extension moves your filing deadline to October 15, but the IRS still expects your tax payment by the original April deadline. Pay an estimate now to stop the failure-to-pay penalty and interest from compounding.
Key takeaways
- An extension buys time to file paperwork, not time to pay the balance due.
- Failure-to-pay penalties accrue at 0.5% per month on the unpaid balance, plus interest.
- Failure-to-file penalties are ten times worse — 5% per month — so always file the extension even if you can't pay.
- State extensions do not always follow the federal one; New York and New Jersey have their own rules.
- Estimated payments for the current year are still due on their own quarterly schedule.
Mistake 1: Assuming the payment deadline moved
This is the big one. Form 4868 extends the deadline to submit your return, not to settle your bill. If you owe and pay nothing in April, interest starts running immediately and the failure-to-pay penalty stacks on top. Estimate your liability, round up, and send something.
Mistake 2: Skipping the extension because you can't pay
The failure-to-file penalty is 5% of the unpaid tax per month, capped at 25% — ten times the failure-to-pay rate. Filing the extension is free and takes minutes. Even in the worst-case cash crunch, file.
Mistake 3: Forgetting the state
Some states honor the federal extension automatically; others require a separate form, and most still want the payment in April. If you file in both New York and New Jersey, confirm each one separately.
Mistake 4: Treating October as a fresh start
An extension does not pause your current-year estimated payments. Q2 is still due in June whether or not last year's return is finished. Two years of tax can collide fast if you ignore this.
Mistake 5: Waiting until October 14 to gather documents
Six extra months evaporate. Missing K-1s, brokerage corrections, and rental records take time to chase. Start in the summer, not the night before.
What to do right now
- Estimate your balance and pay as much as you reasonably can.
- File Form 4868 (and the state equivalent if required).
- Set up an IRS payment plan if the balance is large.
- Book a mid-year review so next April isn't a surprise.
FAQ
"Does an extension increase my audit risk?" No. A carefully prepared October return is safer than a rushed April one.
"Can I still get a refund if I extend?" Yes. If you're owed money there's no penalty for filing late — but you have three years to claim it before it's gone.
"What if I can't pay at all?" File anyway, then request an installment agreement or an offer in compromise. Silence is the only option that guarantees things get worse.