Tax Extensions 2025: 12 Tips to Save You Money by April 15, 2026

Last Updated on March 25, 2026 by Robert Green

Tax season can be stressful, especially for traders and investors with complex reporting. Filing a tax extension is often a strategic move—not a red flag—that provides more time for accuracy and planning.

What’s new for the 2026 tax season

The April 15, 2026, deadline falls on a Wednesday (no holiday-related extension).
IRS enforcement continues to focus on late-payment penalties and underpayment compliance.

When it makes sense to file early

Reasons to file early include faster refunds, financing needs, identity theft protection, tax certainty, and avoiding extension risks.

Key deadlines

The federal income tax filing deadline for 2025 returns is April 15, 2026. Taxpayers can request an automatic six-month extension to file by submitting Form 4868 by April 15, extending the filing deadline to October 15, 2026. However, an extension only applies to filing—not payment—so taxes owed must still be paid by April 15, 2026, to avoid penalties and interest.

Tip #1: Consider filing an extension

Filing an extension gives you additional time to gather complete and accurate information, reducing the risk of errors.

Ways to file Form 4868:

E-file through your tax software or tax professional
IRS Direct File / IRS.gov account (ID.me verification)
IRS Free File (if eligible)
Pay your balance due online (IRS Direct Pay, EFTPS, or credit/debit card) and indicate it’s for an extension—this can count as filing Form 4868
Mail a paper Form 4868 to the IRS (required if attaching a Section 475 election statement)

Trader-specific note: Traders and investors frequently benefit from extensions due to late or corrected Forms 1099-B, partnership K-1 delays, and wash sale adjustments. Filing early with incomplete data often leads to amended returns.

Timing reminder: Do not wait until the final 30 days before April 15 to engage a CPA or organize your tax information. Most firms impose internal deadlines and will require an extension if materials are submitted too late.

Tip #2: Pay what you owe

Even if you file an extension, you should estimate and pay your tax liability by April 15, 2026.

To minimize penalties, taxpayers can rely on IRS safe-harbor rules—generally paying 100% of their prior-year tax liability (110% for higher-income taxpayers).

Strategic overpayment approach:
If you are profitable in Q1 2026—particularly with trading gains—consider conservatively overpaying your extension estimate. Excess payments can be applied toward 2026 estimated taxes, creating a buffer against income volatility and underpayment penalties.

Tip #3: Avoid rushing your return

Filing prematurely with incomplete or estimated data increases the likelihood of errors and amended returns. An extension provides time to ensure accuracy, especially for complex returns.

Audit myth clarification: Filing early does not reduce the risk of an IRS exam. In some cases, early-filed returns—particularly those claiming refunds—may receive additional scrutiny as the IRS processes returns early in the season.

Tip #4: Make IRA and HSA contributions

You can still make IRA and HSA contributions for the 2025 tax year up until April 15, 2026. Extensions do not extend this deadline.

SEP IRA and Individual 401(k) profit-sharing plans can be contributed up until the due date of the extended return, October 15, 2026.

Tip #5: Stay on top of estimated taxes

Filing an extension does not delay your 2026 estimated tax obligations. First-quarter 2026 estimated tax payments are still due April 15, 2026.

Additionally, check your resident state’s tax extension rules and safe harbor requirements. State rules vary widely—some require a separate extension filing, while others grant automatic extensions only if no tax is due.

Tip #6: Understand penalties

Late filing penalty: up to 5% per month (maximum 25%)
Late payment penalty: 0.5% per month (maximum 25%)

Interest accrues on unpaid balances regardless of extension status. The IRS currently charges 8% interest (compounded daily) on underpayments, making it costly to underpay even if you file an extension.

Always file the extension—even if your estimate is rough, or you can’t pay in full: It is critical to file Form 4868 on time, even if your calculation of tax due is imprecise or you cannot pay the full amount. Filing the extension avoids the much higher late-filing penalty (5% per month for up to five months). By comparison, the late-payment penalty of 0.5% per month is more comparable to the cost of a margin loan.

Tip #7: Why extensions are especially important for traders

Traders often receive corrected or delayed reporting well after April, including:

Corrected Forms 1099-B from brokers
Wash sale adjustments across accounts
Partnership and fund K-1s

Filing on extension helps avoid inaccuracies and reduces the need for amended returns.

Additional trader-specific considerations:

Wash sale reconciliation: Brokers report wash sales on a per-account basis, but traders must reconcile wash sales across all accounts, including IRAs.
Multiple broker coordination: Traders using multiple brokers often encounter inconsistent or corrected 1099-B reporting.
Departures from 1099-B reporting: Brokers may classify options as securities, while certain positions may qualify for Section 1256 treatment. Additionally, 1099-Bs do not reflect Section 475, requiring traders to use trade accounting solutions.
Capital loss carryforwards: Verify prior-year capital loss carryforwards, which are often misstated or overlooked.
Entity coordination: Align S-Corporation or partnership K-1 reporting with individual returns.
State tax considerations: Address multi-state activity, residency changes, and differing state extension rules.
Section 1256 vs. Section 475 review: Evaluate tax treatment of trading activity for future planning.
Audit risk reduction: Use the extension period to strengthen documentation and support tax positions.

Tip #8: Section 475 timing reminder

The deadline for a 2026 Section 475 mark-to-market election for individuals is April 15, 2026. It is now too late to elect Section 475 for the 2025 tax year.

For entities, the deadline was March 15, 2026, for S-Corporations and partnerships. Extensions do not extend Section 475 election deadlines.

How to file the Section 475 election with an extension:
It is not possible to e-file a tax extension with a Section 475 election statement attached. You must print Form 4868 (2025 federal extension) from your tax software, attach the 2026 Section 475 election statement, and mail the extension with the election to the IRS by April 15, 2026.

You can still e-file your entire 2025 tax return either before or after the extension deadline.

Second step — Form 3115 timing:
After making a timely Section 475 election, the second step is to file Form 3115 (Application for Change in Accounting Method). This is filed with your timely filed tax return (including extensions), not with the extension itself.

For example, a 2025 Section 475 election due April 15, 2025, requires a 2025 Form 3115 filed with the 2025 tax return by the extended due date of October 15, 2026—provided you filed a valid extension by April 15, 2026. Form 3115 is not required by the April 15 deadline.

For the election statement and additional guidance, see Green’s 2026 Trader Tax Guide (Chapter 2: Section 475 MTM).

Tip #9: Use the extension for better planning

An extension provides time to implement tax strategies, review financial data, and coordinate with advisors.

It provides an additional six months to assess tax positions in light of new interpretations of tax law, court cases, IRS memorandums, and other evolving guidance.

Tip #10: Reduce the need for amended returns

Extensions help ensure all information is complete before filing, minimizing the need for amendments.

Tip #11: Keep proper documentation

Use the extension period to gather and organize all supporting documents for your return.

Tip #12: Work with a qualified tax professional

Complex returns benefit from professional guidance, especially for traders and high-income taxpayers.

Most reputable CPA firms are extremely busy during tax season and may be short-staffed, particularly due to changes in the new tax law. It is generally a mistake to pressure a CPA to complete a return at the last minute (often the final ~30 days before April 15).

Many firms enforce internal deadlines for submitting tax information; if those are missed, they will require clients to file an extension.

Conclusion

In a year with evolving tax rules, filing an extension is not just about convenience; it’s a strategic decision that allows for more accurate reporting and better tax planning. For traders in particular, extensions provide critical time to address complex reporting issues, plan for upcoming elections, including Section 475 for 2026, and implement strategies aligned with new tax law developments.

Filing an extension is often the most strategic move for traders—providing time to improve accuracy, plan, and achieve better tax outcomes.