Filing a tax extension may give you more time to prepare your tax return, but it doesn’t give you more time to pay what you owe. If you’re considering filing Form 4868, it’s important to understand how estimated payments work and how to avoid unnecessary penalties or interest.
What Does an Extension Actually Do?
Filing an extension gives you an extra six months to submit your return (until October 15), but any taxes owed are still due on April 15.
If you underpay, you could be charged both late payment penalties and interest on the unpaid amount, even if you file the return itself on time.
How to Estimate Your Payment
To avoid penalties, try to pay at least 90% of your total tax liability by April 15. If you're unsure how much that is, your CPA can help with a projection based on last year’s return, current income, and any known changes.
Common Reasons to File an Extension:
Waiting on K-1s or other third-party documents
Needing more time for complex real estate or business deductions
Recent life changes (inheritance, new business, relocation)
What Happens If You Overpay?
Overpaying isn’t a problem, any overage will be refunded once your return is filed. But underpaying can create a cash flow issue if you're hit with unexpected penalties later.
How Holmes & Associates Can Help
Our team at Holmes & Associates can help you file your extension properly and calculate a safe estimated payment. For real estate investors, business owners, or clients with trusts and estates, this peace of mind is worth it. Let’s make sure you’re covered, even if you’re not quite ready to file.