Imagine this: it is April 15th, the tax deadline is here, and you are scrambling. You cannot find a document. Your accountant says, "Let's file an extension." You sigh in relief... thinking you just bought yourself more time to pay.
But here is the truth: you did not.
A tax extension only gives you more time to file, not to pay. And that little mix-up? It could cost you big bucks in penalties.
In this post, we are going to break down the most common myths about tax extensions, explain what they really mean, and show you how to dodge the IRS landmines that trip up so many people each year.
Myth #1 — A Tax Extension Gives You More Time to Pay Taxes
Nope. Not even close.
A tax extension only buys you 6 more months to file your return, not to hand over your money.
If you owe taxes and do not pay by the April deadline, you will still get hit with penalties—even if you file an extension.
Late Filing = Big Penalties (Unless You File That Extension)
Let us say you miss the April 15th deadline and do not file anything. That is where the Failure to File penalty kicks in.
It is 5% per month (up to 25%) of what you owe.
Example: Owe $10,000 and file 5 months late? That is $2,500 in penalties!
Now here is the good news: file an extension and you skip this late filing fee completely. Sweet, right?
But Wait — You Can Still Get Penalized Even If You File the Extension
Here comes the twist: there is also a Late Payment Penalty.
This one is 0.5% per month (also up to 25%) if you do not pay what you owe by April 15.
So, if you file an extension but do not send in your $10,000 payment until 5 months later? That is another $250 down the drain... plus interest.
"But How Do I Know What to Pay If I Have Not Filed Yet?"
Great question.
You basically have to estimate your tax bill. Here is how:
- Use last year's return as a guide
- Subtract any W-2 withholdings or quarterly payments you have already made
- Pay that amount by April 15
Even if you are wrong, it is better to guess and pay something than to pay nothing and get hit with penalties later.
The IRS Wants Its Money Early — Even Before April 15
Here is the kicker: the IRS does not just want you to pay by the deadline... they want some of that money during the year too.
If you are a freelancer, contractor, or do not have taxes withheld from your paycheck, you are supposed to make quarterly estimated payments.
If you do not? You might owe an Underpayment Penalty — even if you file and pay on time.
How to Calculate Estimated Tax Payments the Easy Way
The IRS says you need to pay:
- 90% of this year's taxes, OR
- 100% of last year's taxes (or 110% if you made a lot more money)
Most CPAs recommend using last year's tax numbers because it is easier and safer.
Best Tax Preparer Tip — Pay Now, Stress Less Later
Here is what smart taxpayers do:
✅ File a tax extension if needed
✅ Estimate and pay what they likely owe by April 15
✅ Make quarterly estimated tax payments if self-employed
✅ Avoid all the "gotcha" penalties from the IRS
Follow that plan, and even if you are not ready to file, you will be way ahead of the game.
Conclusion: Stop the Confusion — Be a Tax Extension Pro
Tax extensions sound simple, but the confusion around them is super expensive.
Remember:
- An extension gives you more time to file, not to pay
- You will face filing penalties if you do not file on time
- You will face payment penalties if you do not pay on time
- Estimated tax payments are your secret weapon
Now that you know the truth, you can avoid the IRS's nasty surprises and take control of your taxes like a pro.
FAQs: Tax Extension Questions People Always Ask
Can I file a tax extension online?
Yes! You can file IRS Form 4868 online through the IRS website or tax software.
What if I overpay when estimating my taxes?
You will get a refund. No harm in overpaying — it is better than being late.
Do I need a reason to file an extension?
Nope. You do not need to explain anything to the IRS. Just file before the deadline.
Can I avoid penalties if I cannot afford to pay by April 15?
You might qualify for a payment plan — but the penalties usually still apply unless you pay on time.
How do I avoid the underpayment penalty?
Make sure you are withholding enough taxes or making estimated payments that cover 90% of this year's tax or 100% of last year's.
Need help with your taxes or tax planning? Contact JKJ Enterprises today for a free consultation.
