Many taxpayers assume that filing a tax extension gives them extra time to both file and pay their taxes. However, this is a common misunderstanding. While an extension can give you more time to submit your paperwork, it does not extend the deadline for paying any taxes you owe.

Taxes Are Still Due on the Original Deadline

Even if you file your tax return before the extended due date, the IRS still requires that any taxes owed be paid by the original filing deadline. Requesting an extension only protects you from the failure-to-file penalty; it does not delay your obligation to pay.

Penalties for not Filing or Paying on Time

If you do not file your tax return by the original due date, the IRS may apply penalties and interest. Two main penalties can be charged each month:

• Failure-to-file penalty: 5% of the unpaid taxes per month
• Failure-to-pay penalty: 0.5% of the unpaid taxes per month

When both penalties apply in the same month, the IRS reduces the failure-to-file penalty by the amount of the failure-to-pay penalty. This results in a combined penalty of 5% per month, rather than 5.5%.

Interest Adds Up Quickly

In addition to penalties, interest begins to accumulate on unpaid taxes one day after the original due date of the return. This interest continues to build until the full balance is paid off, increasing the total amount you owe over time.

Why Paying on Time Matters

Filing an extension can be helpful if you need more time to prepare your return, but it’s important to estimate and pay as much of your tax bill as possible by the original deadline. Doing so can significantly reduce penalties and interest and help you avoid a larger tax bill later.

A tax extension gives you more time to file, not more time to pay. To avoid unnecessary penalties and interest, make sure any taxes owed are paid by the original due date, even if your return is filed later.