As is traditional, the 2025 IRS tax filing deadline is April 15th. What is also unfortunately traditional is the run-up to this date, which tends to be a stressful and complicated time even at the best of times.
With the most recent spate of natural disasters (such as the California wildfires and Hurricane Milton) making the tax filing process more difficult than normal for many, a tax extension can be a valuable tool for alleviating this pressure and providing much-needed breathing room.
In this guide, we’ll explore the 2025 tax extension process, the reasons for requesting an extension, and how a tax advisor from Harness can help you.
Table of Contents
- What is a tax extension?
- Why do I need a tax extension?
- How to file a tax extension (2025)
- The importance of accurate tax estimates
- How to avoid tax extension penalties
- State tax extensions
- Other forms of tax extension
- How Harness can help
- FAQs on tax extensions
What is a tax extension?
Before we get into the details of tax extensions, it’s important to understand what a tax extension is—and what it isn’t. A tax extension is a request to the IRS for additional time to file your federal income tax return.
A tax extension does not give you additional time to pay the taxes you owe. This is a common misconception that can lead to problems. Many taxpayers mistakenly believe that a tax extension gives them more time to pay their tax bill. This is not the case.
Even if you’re granted an extension to file, your estimated tax liability is still due by the original April 15th deadline. Failing to meet this payment deadline can result in penalties and interest, even if you have a valid extension to file your return.
With that out of the way, let’s look at some of the reasons why you may need a tax extension.
Why do I need a tax extension?
As mentioned, the natural disasters that have, unfortunately, hit many parts of the country have resulted in the IRS granting extra time to individuals and businesses in the affected areas to file their tax returns. Kentucky taxpayers, for example, who’ve been affected by the severe storms will have until November 3, 2025, to file their tax returns.
A full list of tax provisions for states affected by natural disasters can be found here. Disasters aside, however, there are other reasons why you may want to apply for a tax extension.
Incomplete tax documentation: Waiting for essential tax documents, such as W-2s, 1099s, or other forms, is a common reason to file for a tax extension. Rushing to file with incomplete or inaccurate information can be an unnecessarily costly process, with a tax extension providing you with the time needed to obtain all the correct documentation.
Unexpected life events: Unforeseen circumstances, including illness, bereavement, or other emergencies, can disrupt tax preparation. A tax extension provides the flexibility to address these matters without the added pressure of the tax filing deadline.
K-1 Reporting: K-1 forms detail a partner’s share of income, losses, and deductions from a partnership, and are commonplace tax forms for investors in private equity, hedge funds, and venture capital. As well as being complicated to complete, K-1 forms are often issued later than other tax documents, frequently compelling filers to seek tax extensions.
Equity Compensation: Extensions offer valuable time to optimize tax strategies for startup employees and executives dealing with equity compensation such as RSUs, ISOs, and QSBS. Determining the fair market value of stock options, for example, can be time-consuming, with a tax extension allowing individuals to make sure they’re maximizing the potential tax benefits of their equity compensation.
Strategic tax planning: Complex financial situations, such as evaluating investment options, calculating business deductions, or engaging in trust and estate planning, can benefit greatly from the additional time a tax extension offers, particularly for high-net-worth individuals. It should be noted, however, that high-income individuals residing in certain states (New York and California, for example) may not automatically qualify for tax extensions.
Lack of organization: If your financial records are disorganized or time constraints hinder proper tax preparation, a tax extension provides the necessary time to organize yourself and avoid potentially costly errors or overlooked deductions and credits.
When a tax extension may not be right for you
If you’re unable to pay your taxes: If your primary concern is an inability to pay your tax bill, a tax extension isn’t the solution. While it might seem like a way to gain some time, it’s important to remember that the payment deadline remains the same, regardless of whether you file for an extension or not. Instead of a tax extension, you should explore IRS payment options and installment plans.
If you’re expecting a refund: If you’re confident that you’ll be receiving a refund from the IRS, there’s generally no reason to delay filing. In this case, it’s usually best to file sooner rather than later to receive your refund promptly. The sooner you file, the sooner you’ll get your money back.
If your tax situation is straightforward: If you have a relatively uncomplicated tax situation, such as being a wage earner with no dependents and all your documents readily available, there’s likely no need for an extension. It’s more efficient to simply get your taxes done and out of the way.
How to file a tax extension (2025)
If you’ve decided that a tax extension is the right choice for you, the key steps and information you need are as follows:
Deadlines to remember
Original filing deadline: April 15th, 2025 (always double-check the IRS website for any official updates or changes to this date).
Extension request deadline: This is the same as the original filing deadline – April 15th, 2025. You need to submit your extension request by this date.
Extended filing deadline: If your extension is approved, you’ll have until October 15th, 2025, to file your complete tax return.
3 ways to request a tax filing extension
Pay online: Pay your estimated taxes owed online and select the option indicating payment is for an extension. This eliminates the need for a separate extension form and provides a confirmation number for your records.
IRS Free File: Use IRS Free File to electronically request an automatic extension. There is no income limit to use Free File for extensions.
Mail Form 4868: Mail Form 4868, “Application for Automatic Extension of Time To File U.S. Individual Income Tax Return,” to the IRS. You can also file this form online through an IRS e-filing partner or a tax professional. When completing Form 4868, estimate your total tax liability for the year and subtract any taxes already paid. If completing a physical Form 4868, be sure to mail the form well in advance of the April 15th deadline to make sure it arrives on time.
Paying taxes with your extension
As we’ve emphasized, even if you’re requesting an extension, you are still obligated to pay your estimated taxes by April 15th. You can make payments online through the IRS Direct Pay system, by phone using a credit or debit card, or by mail using a check or money order. Many tax software programs also integrate with IRS payment systems, allowing you to pay directly from within the software.
The importance of accurate tax estimates
No matter how you pay, it’s vital to estimate your tax liability as accurately as possible. If you underestimate your taxes by any significant amount, you’ll likely owe more money later, along with interest and potential penalties.
Don’t just make a rough guess when estimating your tax liability—take the time to carefully calculate your income, deductions, and credits to arrive at a realistic estimate. Underestimating your taxes can lead to penalties and interest, while overestimating will result in a refund.
A refund is not a bad thing in itself, but it does mean that you’ve essentially given the government an interest-free loan.
What is the 90% rule?
The IRS places a strong emphasis on the “90% rule.” This means they expect you to pay at least 90% of your actual tax liability by the original April 15th deadline. Even if you file for an extension, failing to meet this 90% threshold can result in penalties, even if your initial estimate was reasonably close.
How to avoid tax extension penalties
While a tax extension can be a valuable option, it’s essential to be aware of the potential pitfalls and take steps to avoid them.
Late payment penalties: If you fail to pay at least 90% of your estimated tax liability by the original April 15th deadline, you’ll likely incur a late payment penalty. This penalty is typically calculated at a rate of 0.5% of the unpaid amount per month or part of a month that the taxes remain unpaid (up to a maximum of 25% of the unpaid amount). In addition to the penalty, interest will also accrue on any outstanding balance.
Late filing penalties: Failing to file your complete and accurate tax return by the extended October 15th deadline will result in a late filing penalty. This penalty is generally assessed at a rate of 5% of the unpaid taxes for each month or part of a month that the return is late (again, up to a maximum of 25% of the unpaid amount).
Interest on unpaid taxes: Interest will accrue on any unpaid tax balance, even if you have a valid extension to file. The interest rate is subject to fluctuation, so it’s essential to check the IRS website for the most up-to-date rate. This interest accrues from the original tax deadline until the tax is paid in full.
State tax extensions
Federal and state tax extensions are entirely separate processes. If you file for and receive a federal tax extension that doesn’t automatically grant you an extension with your state tax agency. Most states require you to file a separate state tax extension form, often with its own specific deadlines and procedures.
Some states may automatically grant an extension if you’ve filed a federal extension, but this isn’t a universal rule. It’s your responsibility to check with your state’s tax agency website or consult with a tax professional to determine the specific requirements for filing a state tax extension in your state.
Other forms of tax extension
Extensions for people living abroad: U.S. citizens and resident aliens living abroad may qualify for an automatic two-month extension to file their tax returns. This automatic extension typically pushes the filing deadline to June 15th.
Form 2350, “Application for Extension of Time to File U.S. Income Tax Return,” is used for those living abroad who expect to qualify for special tax treatment. For a comprehensive understanding of tax obligations and extension rules for those living abroad, consult IRS Publication 54, “Tax Guide for U.S. Citizens and Resident Aliens Abroad.”
Business extensions: Businesses that require additional time to file various business income tax, information, and other returns can use Form 7004, “Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns.” Form 7004 is specifically designed for businesses and provides a mechanism for requesting an extension of time to file.
Net Operating Loss Carryback: Corporations that are expecting a net operating loss carryback can file Form 1138, “Extension of Time for Payment of Taxes by a Corporation Expecting a Net Operating Loss Carryback.” This form allows corporations to postpone payment of taxes if they anticipate a net operating loss carryback that will reduce their tax liability.
How Harness can help
For most taxpayers, applying for a tax extension is a relatively straightforward task. That said, tax filing can be a complicated process in which even relatively simple tasks can get muddled, mismanaged, or forgotten.
At Harness, we connect individuals and businesses with qualified tax professionals who will not only handle the entire tax filing process for you but deliver proactive tax planning, helping you optimize your financial strategies all year round.
FAQs on tax extensions
Below are answers to the most frequently asked questions on tax extensions
What is an IRS tax extension, and how does it differ from an extension to pay?
An IRS tax extension grants you additional time to file your federal tax return, not to pay any taxes owed. The original due date for payment remains unchanged, even with an extension.
Who’s eligible for an income tax extension?
Any taxpayer can file an extension. You don’t need a specific reason. However, you must still estimate and pay how much tax you owe by the original deadline.
How do I file an extension for my 2025 federal tax return?
You can file an extension electronically using IRS Free File or tax preparation software, or by mailing federal form 4868, “Application for Automatic Extension of Time To File U.S. Individual Income Tax Return,” to the Internal Revenue Service.
Is my tax return automatically extended if I miss the April 15th deadline?
No, your federal tax return is not automatically extended. You must actively request an extension by the due date to avoid late filing penalties.
Where can I find reliable tax extension information?
The most reliable source for tax extension information is the Internal Revenue Service website (irs.gov). You can also consult with a qualified tax professional.
How do I know how much tax to pay when I file an extension?
You must estimate how much tax you owe on Form 4868. This requires calculating your total tax liability for the year and subtracting any taxes already paid.
What happens if I pay online, is my return automatically extended?
Yes, if you pay your estimated taxes owed online using an approved IRS payment method and select the option indicating payment is for an extension, your return is effectively and automatically extended. You will receive a confirmation number.
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