Tax Extensions 2024: 12 Tips To Save You Money by April 15, 2025

Last Updated on April 11, 2025 by Robert Green

Individual tax returns for 2024 are due April 15, 2025, but many active traders won’t be ready to file on time. Brokers often issue corrected 1099-Bs close to the deadline, and partnerships and S-Corps filing by March 17, 2025, may not deliver K-1s until after April 15. Add to that the complexity of wash sale accounting, and it’s easy to see why most active traders file extensions—and why doing so can save you money.

You may not need to file an extension if you’re eligible for disaster tax relief. But if you plan to elect Section 475 MTM for 2025, you’ll want to file an extension and attach your election statement.

Tip 1: Get a Six-Month Extension to File

Request an automatic extension by April 15, 2025, using Form 4868. This allows you to file your federal return until October 15, 2025. The IRS doesn’t require a reason—submit the form and pay any tax due. This is an extension to file, not to pay, so you must estimate and pay your 2024 taxes by April 15 to avoid penalties.

Tip 2: Avoid IRS and State Penalties

IRS penalties can be steep:

Late-filing penalty: 5% of the unpaid tax per month (max 25%).
Late-payment penalty: 0.5% per month (max 25%).

Avoid the late filing penalty by filing the extension on time, even if you can’t pay your entire tax bill. If you pay at least 90% of your tax liability by April 15 and file your return by October 15, paying the balance due, you may avoid the late-payment penalty, too—especially if you have reasonable cause.

Tip 3: File Even If You Can’t Pay

Let’s say you owe $50,000 and file your extension on time but can’t pay. If you file your tax return on October 15, 2025, you would incur a late-payment penalty of $1,500 (six months × 0.5% × $50,000), plus interest. However, by filing the extension on time, you’d avoid the much steeper late filing penalty of $11,250. That’s 7.5 times more costly than paying late.

By simply filing the extension on time in the above example, you avoided a late-filing penalty of $11,250 (six months late x 5% per month [25% maximum], less late-payment penalty factor of 2.5% = 22.5%; 22.5% x $50,000 = $11,250). The IRS also charges interest on taxes paid after April 15, 2025.
Explanation: The IRS reduces the late-filing penalty by the amount of the late-payment penalty in months when both apply. So in this case: 22.5% × $50,000 = $11,250 avoided.

Tip 4: Add a Cushion for Q1 2025 Estimated Taxes

If you’re profitable in early 2025, consider overpaying your 2024 tax extension to cover Q1 2025 estimated taxes. This strategy:

Covers underpayment risk for 2024.
Funds Q1 2025 estimated taxes.
Creates a refundable overpayment if your 2025 income ends up lower.

With IRS underpayment interest at 7% (2025 Q1), overpaying can be a strategic move.

Tip 5: Consider a 2025 Section 475 MTM Election

Traders with trader tax status (TTS) should consider electing Section 475(f) to convert capital gains/losses to ordinary income/loss, avoid the wash sale rule and capital loss limitation, and qualify for the 20% QBI deduction. (See Unlock Tax Savings with Section 475: Avoid Wash Sales and Capital Loss Limits.)

Deadlines:

Individuals: Attach the 2025 Section 475(f) election to a 2024 tax return or extension filed by April 15, 2025.
Partnerships & S-Corps: Attach to a return or extension filed by March 17, 2025.

Also, remember to file Form 3115 with your 2025 tax return to complete the election process.

Tip 6: File When It’s Convenient

Wealthy and organized taxpayers often treat October 15 as the absolute deadline and file in the summer. Rushing to file a complete tax return by April 15 can result in errors and missed deductions. You can use the extra time wisely. That said, don’t forget to file the extension by April 15, 2025.

Tip 7: Be Conservative With Payments

Be aggressive on your tax positions but conservative with cash. If you overpay, apply the excess to 2025 estimated taxes and avoid red flags. Traders often benefit from carrying over credits rather than requesting refunds.

Tip 8: Get More Time for Retirement Plan Contributions

Filing an extension gives you more time to fund your Solo 401(k), SEP IRA, or defined benefit plan for 2024—until October 15, 2025. However, IRA contributions are still due by April 15, 2025.

Tip 9: Respect Your Accountant’s Process

Extensions: Let your tax pro prepare a solid draft and finalize your return when complete information arrives. Don’t pressure them into a rushed April filing, especially if you’re missing K-1s or trade reconciliations.

Tip 10: Focus on Trade Accounting After April 15

If you’re locked into a $3,000 capital loss limitation, don’t obsess over precise wash sale adjustments before filing an extension. However, if trade accounting could swing you from a capital loss to a gain, prioritize it before April 15. Section 1256 and forex traders can rely on simpler reporting formats.

Tip 11: File State Extensions and PTE Payments

Many states accept the federal extension, but not all. If you owe state taxes, file a state extension and pay any projected taxes on time—states are often less flexible than the IRS. Partnerships and S-Corps should also make PTE tax payments with their Form 7004 extensions to benefit from SALT cap workaround programs.

Tip 12: Know the Rules for U.S. Expats

If you live abroad, the IRS gives you an automatic two-month extension until June 16, 2025, to file and pay. You can also file Form 4868 for an additional four months until October 15. Be sure to understand your eligibility and requirements.

Final Thought

Extensions aren’t procrastination—they’re thoughtful tax planning. They give traders and investors time to make strategic decisions and file fully, accurately, and without stress.