Happy Dollars Tax Services

On The Go • Your guide to extensions, penalties & payment plans

Filing Extension
What is a tax extension?
A tax extension gives you 6 extra months to file your return, but it does not give you more time to pay. If you owe taxes, that payment is still due by April 15 to avoid penalties and interest.
Important Deadlines
Extension vs. payment deadline
Original filing deadlineApril 15
Payment still dueApril 15
Extension request deadlineApril 15
New filing deadline (with extension)October 15
Good to Know
Who should file an extension?
Anyone not ready to file a complete and accurate return: missing documents, waiting on K-1s, life happened. Filing an extension avoids the failure-to-file penalty (5% per month). Even if you can't pay, always file something.
How to request an extension
1
File Form 4868
Submit by April 15 through your tax preparer, IRS Free File, or tax software. It takes minutes.
2
Estimate and pay what you owe
Make your best estimate and pay as much as you can. Underpaying leads to interest and a small late-payment penalty.
3
File your return by October 15
This is your new deadline. Missing it means late-filing penalties start all over again.
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Penalties and interest are two separate charges. Penalties are a percentage of what you owe. Interest compounds daily on top of that, and it does not stop until you pay in full.
Most Expensive
Failure-to-file penalty
5% of unpaid taxes for each month (or part of a month) your return is late. Maxes out at 25% of what you owe. This is the most expensive penalty, so always file on time or file an extension.
Failure to Pay
Late payment penalty
0.5% of unpaid taxes per month. Also maxes at 25%. Much smaller than the failure-to-file penalty. If both apply at the same time, the failure-to-file penalty is reduced to 4.5% so the combined rate stays at 5% per month.
Interest
IRS interest charges
Set at the federal short-term rate + 3% (currently around 7–8% annually, adjusted quarterly). Interest compounds daily on any unpaid balance, including unpaid penalties. It does not stop until the full balance is paid.
Penalty Relief
First-time penalty abatement
If this is your first time with a penalty and you have a clean 3-year filing history, you may qualify to have the penalty waived entirely. You have to ask for it. It is not automatic. Talk to your tax professional about requesting this.
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Estimate Your Penalties

This is an estimate only. Actual amounts depend on your specific situation. Contact your tax professional for exact figures.

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Payment Plans
What is an IRS installment agreement?
If you can't pay your full tax bill, the IRS lets you set up monthly payments called an installment agreement. Interest and penalties continue during the plan, but it prevents the IRS from taking collection action against you.
Which plan fits you?
Short-Term Plan
Owe under $100k • Pay within 180 days
Free to Set Up
Long-Term Plan
Owe under $50k • Monthly payments up to 72 months
$31–$130 Fee
Offer in Compromise
Settle for less than you owe • Strict qualifications
Complex Process
Monthly Payment Estimator
How to apply for a payment plan
1
Make sure all returns are filed
The IRS will not approve a payment plan if you have unfiled returns. Get current first.
2
Apply online at IRS.gov
Use the IRS Online Payment Agreement tool at irs.gov/opa. Approval is often instant.
3
Or work with your tax professional
They can apply on your behalf and help you get the best possible terms for your situation.
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