Filing Late Costs Ten Times What Paying Late Costs, and an Extension Does Not Change It Before October 15
UNIONDALE, NY, September 2026. Fine & Clear Tax Solutions, a tax resolution firm serving Nassau and Suffolk taxpayers, is setting out guidance for New Yorkers who filed a tax extension in April, are approaching the October 15 deadline, and already know the return will show a balance they cannot pay. Filing and paying are two separate obligations with two separate penalties attached, and the penalty for not filing is set at ten times the rate of the penalty for not paying.
What an Extension Does and What It Does Not Do
An extension requested by the April due date gives a taxpayer until October 15 to file without penalties. The IRS lists three ways to get it, including filing Form 4868 and simply paying online and checking the extension box, which requires no separate form at all.
The IRS is explicit about the limit of that relief, stating on the same page that taxpayers should pay any tax owed by the April filing date because the extension is only for filing the return.
The distinction is not academic. It is the difference between two penalties that accrue at very different rates.
The failure to file penalty is 5 percent of the tax due, less any tax paid on time and available credits, for each month or partial month a return is late, accruing to a maximum of 25 percent. Where a return is more than 60 days late, a minimum penalty applies, which for returns due after December 31, 2025 is $525 or 100 percent of the underpayment, whichever is less.
The failure to pay penalty is 0.5 percent of the unpaid tax for each month or part of a month it remains unpaid, also capped at 25 percent.
The two do not simply stack. Where both apply in the same month, the IRS reduces the failure to file penalty by the amount of the failure to pay penalty, so the combined charge is 5 percent a month rather than 5.5 percent.
After five months the failure to file penalty maxes out and the failure to pay penalty carries on alone. The practical shape of it is that the filing penalty does all of its damage in the first five months, and then stops. Whatever the decision to hold a return back is going to cost, it has cost almost all of it by month five.
"Month for month the filing penalty is set at ten times the paying penalty, and it does its damage in the first five months, which is exactly the window people spend deciding what to do," said Guy A. Finocchiaro, CPA. "The instinct is to hold the return back until you can afford the check. That instinct is expensive and it is backwards. In my experience it is also the single most common reason a manageable balance stops being manageable."
Why the Return Gets Held Back
"The pattern I see every October is somebody who extended in April meaning to sort the money out over the summer, and the summer went the way summers go," said Finocchiaro. "October arrives, the balance is still there, and the return sits unfiled because filing it feels like an admission. By January that account is carrying a filing penalty that never needed to exist, a payment penalty that was coming anyway, and interest accruing on all of it."
"Nobody in that situation is being careless. They are embarrassed, and embarrassment makes people wait," he said. "We understand it completely, and the only thing we would change is the order. File the return, then deal with the balance. Those are two different conversations and only one of them has a deadline in October."
What the Options Actually Are
The firm's guidance is that a balance a taxpayer cannot pay in full has established routes, none of which require the return to be held back.
A taxpayer who can clear the balance over time can request an installment agreement by submitting Form 9465 or applying through the IRS Online Payment Agreement.
For individuals the streamlined route runs in two tiers, assessed liability under $25,000 and assessed liability from $25,001 to $50,000. Interest accrues on the balance throughout, so an agreement makes the debt manageable rather than static.
A taxpayer whose income genuinely will not cover necessary living expenses alongside a payment can request currently not collectible status, which suspends active collection while that remains the case.
Where the balance cannot realistically be paid at all, an offer in compromise submitted on Form 656 may settle it for less, on documented figures rather than on argument.
New York State runs its own parallel processes, with its own payment agreements and its own offer in compromise program. Resolving a federal balance does nothing about a state one.
"Every one of those requires the return to be filed first," said Finocchiaro. "Unfiled returns close all of those doors at once. That is why October 15 matters even to somebody who cannot write the check."
Who Should Act Before October 15
Three groups face the deadline differently. Taxpayers who extended in April and have not yet started the return.
Taxpayers who know the return will show a balance and have not decided what to do about it. And taxpayers already in an installment agreement for an earlier year, for whom a new balance on the extended return can default the existing agreement.
About Fine & Clear Tax Solutions
Fine & Clear Tax Solutions is a tax resolution firm based in Uniondale, New York, serving Nassau and Suffolk taxpayers. The firm is led by Guy A. Finocchiaro, CPA, and Annamaria Luca-Finocchiaro, CPA, each holding a certificate from the State of New York, and it resolves IRS and New York State tax debt through offers in compromise, installment agreements, penalty abatement, and collection appeals. More information is available at https://cleartaxresolution.com/.