The Confusing Tax Mistake Most People Make Every Year

Imagine this: it's April 15th, the tax deadline is here, and you're scrambling. You can't 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’s the truth: you didn’t.

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're 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 don’t pay by the April deadline, you’ll still get hit with penalties even if you file an extension.

Late Filing = Big Penalties (Unless You File That Extension)

Let’s say you miss the April 15th deadline and don’t file anything. That’s where the Failure to File penalty kicks in.

It’s 5% per month (up to 25%) of what you owe.

Example:

Owe $10,000 and file 5 months late? That’s $2,500 in penalties!

Now here's 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’s also a Late Payment Penalty.

This one’s 0.5% per month (also up to 25%) if you don’t pay what you owe by April 15.

So, if you file an extension but don’t send in your $10,000 payment until 5 months later? That’s another $250 down the drain… plus interest.

“But How Do I Know What to Pay If I Haven’t Filed Yet?”

Great question.

You basically have to estimate your tax bill. Here’s how:

1. Use last year’s return as a guide.
2. Subtract any W-2 withholdings or quarterly payments you’ve already made.
3. Pay that amount by April 15.

Even if you’re wrong, it’s 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’s the kicker: the IRS doesn’t just want you to pay by the deadline… they want some of that money during the year too.

If you're a freelancer, contractor, or don’t have taxes withheld from your paycheck, you're supposed to make quarterly estimated payments.

If you don’t? 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’s easier and safer.

Best Tax Preparer Tip — Pay Now, Stress Less Later

Here’s 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're not ready to file, you’ll 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’ll face filing penalties if you don’t file on time
• You’ll face payment penalties if you don’t 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.

FAQ's Tax Extension Questions People Always Ask