Still not ready to file your tax return? Do this now

What should you do if you can't get your 2015 tax returns finished and filed by this year's April 18 deadline?

Don't just avoid this and think you'll get back to it later. The IRS can come back to bite procrastinators in two ways: with a failure-to-file penalty and a failure-to-pay penalty.

The agency's failure-to-file penalty is generally more than the failure-to-pay penalty. The failure-to-file penalty (for filing late) is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. The penalty starts accruing the day after the filing due date and can be as much as 25 percent of your unpaid taxes.

And if you're also paying after the deadline, the failure-to-pay penalty is 0.5 percent per month of the unpaid tax amount. If both the 5 percent failure-to-file penalty and the 0.5 percent failure-to-pay penalties apply in any month, the maximum penalty that you'll pay for both is 5 percent each month.

So, what should you do if your tax returns aren't ready, or there's no way they'll be filed electronically or mailed by the deadline, and you want to avoid getting slapped with these stiff penalties? You should file a Form 4868, Application for Automatic Extension for Time to File U.S. Individual Income Tax Returns. That will get you an automatic six-month extension to file your final 2015 return.

But what if it's after business hours and the post office is closed? Don't wait until tomorrow to mail an extension. Instead, you can file for one online -- it's easy and free. Log on to the IRS website and use its Free File service. According to IRS instructions, you can file the Form 4868 online and you can send a payment using the agency's electronic payment options.

Here's the most important thing to know: While filing an extension ensures you'll avoid the failure-to-file penalty, it doesn't give you an extension to pay the taxes you owe. If you don't pay what you owe by April 18, the IRS will charge you a failure-to-pay penalty, plus interest.

But if you haven't prepared your return yet, how would you know how much to pay to avoid the penalty?

First, if the amount you owe is less than $1,000, don't worry about it because there's no penalty. Otherwise, you have two options in figuring the amount you should pay.

The first is that you'll have to calculate a reasonable estimate of tax you'll owe and submit that amount as a payment with the Form 4868. The best way to make such an estimate is to prepare your tax return with the information you have on hand and make good-faith guesses where you need figures for information you haven't yet received or organized.

If you do this, the total amount of tax paid (though withholding, estimated payments already made and the payment you send with the extension) should be at least 90 percent of your total 2015 tax liability. So, if the total tax on your draft 1040 is $60,000, your total tax payments made by April 18 should be at least $54,000.

When you do this, just know that if you file an extension and you don't pay 100 percent of your 2015 tax liability by the April 18 deadline, you'll have an unpaid balance due when you finally do get around to filing. The IRS will charge you 4 percent interest on an unpaid balance.

What if you can't make a reasonable estimate of your 2015 tax liability (and you can't determine if you've paid 90 percent of your 2015 tax liability) before the deadline? If you want to avoid the failure-to-pay penalty, you have another option. As long as you've made total payments toward your 2015 tax return that equal an amount that's at least as much as 100 percent of the tax you paid for 2014, you won't be assessed a penalty for late payments.

For those whose adjusted gross income is over $150,000, this amount is 110 percent. So, if your total 2014 tax was $50,000, and in 2015 you paid $45,000, you should pay another $5,000 ($10,000 if your AGI is over $150,000), to avoid the underpayment penalty.

If you expect a refund, you should still file an extension. But if you don't, since you don't owe anything additional, there's no penalty for filing late or penalty for late payments. Still, it pays to get your tax returns filed as soon as possible so you can get your refund.

Remember, if you file a federal extension, you'll have to do the same for your state. Most states will allow for filing an extension and making tax payments on their websites.

  • Ray Martin

    View all articles by Ray Martin on CBS MoneyWatch»
    Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.