Topic 06 · 5 min read
Deadlines, Extensions, and Paying What You Owe
An extension buys time to file, never time to pay.
The federal deadline is normally April 15. An extension moves the filing date to October but the payment is still due in April. Penalties for filing late are far larger than penalties for paying late, so filing on time matters even when the money is not there.
What to know
- Failure to file versus failure to pay
- Late filing typically costs 5% of unpaid tax per month; late payment is about 0.5% per month. Always file.
- Quarterly estimated payments
- People without withholding pay in four installments, normally April, June, September, and January.
- Safe harbor
- Paying at least 90% of the current year's tax, or 100% of last year's (110% at higher income), avoids underpayment penalties.
- Payment plans exist
- Installment agreements let a balance be paid over time; interest continues but collection pressure stops.
- Refund deadlines run out
- Wait more than three years and a refund is simply forfeited.
The tax benefit
Filing on time and arranging a payment plan usually costs a fraction of the penalties that pile up from silence.
Worked example
The cost of waiting
A $2,000 balance filed five months late carries roughly $500 in failure-to-file penalties. The same $2,000 filed on time and paid five months late carries about $50, plus interest.
Watch out for
- An extension request must still include a good-faith estimate of what is owed.
- State deadlines and extension rules do not always match federal ones.
- Paying by card adds a processing fee that a bank transfer does not.
Terms from this topic
ExtensionEstimated taxSafe harborInstallment agreement
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