How to file a tax extension in 2025: What to know if you need more time

Filing taxes is stressful enough when you’re home in the US – but when you’re living abroad, managing businesses, or just facing life’s curveballs, meeting the April 15 deadline can feel impossible.

That’s where a tax extension comes in. 

But like most things tax-related, there are rules, limits, and common myths that need debunking.

As a CPA who’s seen it all – from clients reaching out on April 14 to those asking on October 14 if it's “too late” – here’s everything you need to know about filing a tax extension in 2025, whether you’re in New York, New Zealand, or anywhere in between.

What is a tax extension, and what does it actually give you?

The basics of a tax extension

NOTE! A tax extension gives you more time to file – not to pay.

That’s worth repeating because it’s the #1 misconception I’ve encountered over the years. If you file an extension (via Form 4868), you get an extra six months to file your tax return – moving your deadline to October 15, 2025.

However, any taxes you owe are still due by April 15. Failing to pay by then means interest and possible penalties start accruing, even if you file an extension.

What a tax extension doesn’t do: common misconceptions

To be clear, a tax extension does not:

• Give you more time to pay what you owe.
• Waive penalties or interest on late payments.
• Give you more time to contribute to retirement plans (contributions for IRAs are still due by April 15, unless you qualify for a specific exception).

Pro tip: Think of a tax extension as a way to buy time to file correctly, not a way to postpone dealing with taxes altogether.

When do you need a tax extension?

Common reasons for filing an extension

• Waiting on critical documents (like K-1s, 1099s, or foreign income reports)
• Living abroad and waiting for foreign tax info
• Complicated life events – selling property, divorces, new business ventures
• Needing more time to gather deductions or credits (e.g., foreign housing exclusion)
• Plain old “I forgot and now it’s April 14” syndrome (happens more often than you think)

Who should definitely consider an extension?

Here are a few types of taxpayers who should seriously consider filing an extension:

1. Expats with foreign income and tax credits – foreign banks and employers may issue reports late.
2. Self-employed individuals waiting for final income statements or business expenses to be tallied.
3. Investors – if you’re expecting late K-1s from partnerships, hedge funds, or REITs.
4. Newly married or divorced taxpayers sorting out complex filing status issues.
5. Anyone facing life changes – medical emergencies, job relocations, family crises – that make timely filing difficult.

NOTE! Sometimes, taking more time to get it right saves you way more money (and stress) than rushing to file on April 15.

How to file a tax extension in 2025

The official way: Form 4868

To officially request an extension, you’ll file IRS Form 4868. You can do this:

1. Electronically through the IRS Free File system – Fast, secure, and comes with instant confirmation of receipt.
2. By mailing a paper Form 4868 – Though in 2025, we strongly recommend e-filing as it's much faster and reduces the risk of processing delays.
3. With the help of a tax professional – The best option if your situation is complex, especially for expats or those with foreign income, investments, or multiple streams of income. A tax professional can ensure your extension is filed properly, help estimate taxes owed, and offer strategic advice to avoid unnecessary penalties.

What do you need to include?

• Your name and SSN (or ITIN if applicable)
• Estimated total tax liability for 2024 (yes, even if you can’t pay it all)
• Total payments made so far (e.g., withholding, estimated payments)
• Balance due (if any)

Pro tip: An extension buys time to file, but doesn’t buy time to figure out what you owe. You’ll need a good estimate of taxes due when you file Form 4868.

Form 4868 preview

Do expats automatically get an extension: The special rule for Americans abroad

If you're living outside the US on April 15, you automatically get an additional two months – until June 15, 2025 – to file your return.

But (here we go again):

• Taxes are still due by April 15.
• If you need more time beyond June 15, you can file Form 4868 to push your deadline to October 15.

So technically, expats can combine extensions for up to six months extra – but the IRS still expects payment in April.

Payment vs. filing: What’s the difference?

Key takeaway: Filing an extension avoids the late-filing penalty, but not the late-payment penalty or interest.

Common myths about tax extensions

Myth #1: Filing an extension makes you more likely to get audited

❌ False.

Filing an extension is a routine process, and the IRS doesn't flag you for needing more time. In fact, filing a complete and accurate return late is better than rushing and making mistakes.

Myth #2: If I can’t pay, there’s no point in filing an extension

❌ Also false.

Filing an extension avoids the late-filing penalty, which is 5% per month, while the late-payment penalty is 0.5% per month. Much better to owe only the smaller penalty!

Myth #3: I don’t need to estimate my taxes to get an extension

❌ Wrong again.

The IRS requires an estimate of what you owe on Form 4868, even if you can’t pay it all right now.

State tax extensions: Don’t forget!

Do states honor IRS extensions?

Some do, some don’t. Here’s a quick cheat sheet:

Pro tip: Always check with your state's tax authority for the latest rules!

What happens if you don’t file or pay?

Consequences of inaction

• Late-filing penalty: 5% per month, up to 25% of total owed – If you don’t file on time (or file an extension), the IRS hits you with a hefty penalty that grows fast–up to a quarter of what you owe.
• Late-payment penalty: 0.5% per month, plus interest (current rates around 8% annually in 2025) – Even if you file an extension but don’t pay, you’ll get charged a smaller penalty, plus daily interest that adds up quickly.
• Possible liens, levies, and collection actions for unpaid taxes – If taxes remain unpaid, the IRS can place a lien on your property, garnish wages, or seize bank accounts. Once it gets to this point, it’s harder (and more expensive) to resolve.

Alternatives if you can't pay what you owe

If you can’t pay the full amount by April 15, don’t ignore it – the IRS offers several options to help you manage what you owe without facing the worst penalties:

• Short-term payment plan (up to 180 days to pay in full) – This gives you about six months to pay what you owe. There’s usually no setup fee if you can pay off the balance quickly.
• Long-term installment agreement (monthly payments over time) – If you need longer than 180 days, you can set up a monthly payment plan to pay the debt over time. There may be setup fees, but it’s often more manageable than trying to pay all at once.
• Offer in Compromise (OIC) if you qualify to settle for less – If paying the full amount would create serious financial hardship, you can apply to settle the debt for less than what you owe. The IRS looks at your income, expenses, and assets before approving an OIC.
• Currently Not Collectible (CNC) status if you truly can’t pay – If you’re in a tough financial spot and can’t pay anything now, the IRS may temporarily halt collection efforts. They’ll revisit your situation later, but it gives breathing room if you qualify.

Bottom line

Filing a tax extension is a smart move when you need time to file an accurate return. Just remember the difference between filing and paying, and don’t let fear or confusion prevent you from staying compliant.

If you’re an expat or have complex income, extensions are part of good tax planning – not a red flag.

And if you’re unsure where to start, talk to a tax pro – especially if you’re juggling foreign income, credits, and multiple jurisdictions.