How to file a tax extension: Tips for crypto investors

The official tax deadline for most individuals in the United States is April 15 (or the next business day if April 15 falls on a weekend or legal holiday), but millions of Americans file for extensions every year. The extra time allows you to review your tax reporting, ensure document accuracy, and identify potential tax-saving opportunities.

In this guide, we’ll explain how to file a tax extension in a few simple steps. We’ll also clear up common misconceptions about IRS rules and offer some tips for crypto investors.

What's a filing extension?

IRS extensions give taxpayers six additional months to file their income tax returns when a timely extension request is filed. This typically adjusts the filing deadline from April 15 to October 15 (or the next business day if October 15 falls on a weekend or legal holiday).

However, you still have to pay taxes even if you file an extension. You’ll need to estimate how much tax you owe for the year and pay it by the original due date.

How does a tax extension help crypto investors?

Crypto transactions can span across many exchanges and wallets, DeFi activities, wrapping transactions, and different accounting methods such as FIFO or specific identification. All of this takes time to reconcile, making an extension very useful.

Extending the filing deadline gives you additional time to carefully review your transactions and make sure you’re using the right tax forms. You’ll also have more time to catch errors that might otherwise result in IRS notices or amendments.

What does it cost to file an extension on your taxes?

Filing a tax extension is free if you do it yourself using IRS Free File, by mail, or by making an extension payment through the IRS website. If you use paid software or ask a certified public accountant to handle the paperwork, you’ll have to pay a fee.

Either way, keep in mind that penalties and interest still build up if you don’t pay your taxes by the original due date, regardless of your extension status.

What's the penalty for missing an extended tax deadline?

After you file a valid extension request, missing the new deadline can also result in significant penalties and interest. Here’s what to expect:

• Late filing penalty: If you file late, the IRS will impose a penalty equal to 5% of your unpaid tax for each month (or part of a month) your return is late, up to a maximum of 25%. If your return is more than 60 days late, the IRS charges a minimum penalty of $525 or 100% of the underpayment, whichever is lower.
• Late payment penalty: If your payment is late, you’ll owe 0.5% per month (or part of a month) on the unpaid tax balance, capped at 25%. If both filing and payment penalties apply in the same month, the IRS reduces the late filing portion to 4.5%, keeping the combined total at 5%.
• Interest: The interest rate is determined quarterly and is calculated as the federal short-term rate plus 3%, compounded daily. For Q1 2026, the interest rate is 7%.

Should crypto investors file an extension?

Like most tax decisions, requesting an extension comes with both benefits and drawbacks. The benefits of a tax extension for crypto investors include:

• Better accuracy: If your paperwork isn’t complete or you’re still waiting on certain forms, an extension helps you avoid filing with incorrect information.
• Easier crypto management: With an extension, you can double-check cost basis calculations and make sure all taxable crypto events are properly reported. If you’re planning to file for an extension due to your digital assets, CoinTracker’s Portfolio Tracker gives you a clear view of your entire transaction history, as well as real-time portfolio updates on taxable gains, losses, and income. 
• Updated IRS guidance: In certain situations, such as when a crypto exchange declares bankruptcy or there's a smart contract hack, you might want extra time to understand the tax consequences and take into account any new guidance released by the IRS.
• Potential cost savings: Getting professional help with your taxes is usually costly, and CPAs may charge higher rates around April 15. By filing for an IRS tax extension, you can save on accounting fees and get more personalized help during the less chaotic months.

The downsides include:

• Payment deadlines: Even with an extension, you still need to estimate and pay your expected balance due by the original due date to avoid penalties and interest.
• Delayed refunds: Filing for a tax extension means waiting longer for any refunds. 
• Less certain investment decisions: Without knowing your final tax amount, you may have to hold on to funds escrowed for taxes instead of reinvesting them. 

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How to file a tax extension in 2026: 4 steps

Submitting a tax extension is a straightforward process – here’s what you need to do.

1. Estimate your taxes owed

Add up all your income for the 2025 tax year, then subtract your deductions to arrive at your taxable income, and apply any credits to reduce your tax. This gives you a rough idea of how much tax you owe. Don’t forget to subtract any taxes you already paid through withholding or estimated payments.

2. File your extension request

If you’re an individual, you can file an extension for the 2025 tax year by submitting IRS Form 4868 electronically or by mail by April 15, 2026. Sole proprietors and single-member LLCs reporting on Schedule C should file the same form. Business entities – such as S and C corporations, partnerships, and multi-member LLCs – should file IRS Form 7004 instead (entity original and extended deadlines may differ by entity type). You can also file an extension by making an extension payment. 

As long as they’re filed correctly and on time, extensions are automatically granted. You’ll want to check your extension status so you know when that happens. If you file electronically, you can even get instant confirmation.

3. Pay what you can by April 15

Estimate and pay your tax balance due by the original due date to avoid penalties and interest. If possible, overestimate your payment to minimize the risk of a balance due (and related penalties and interest). Any overpaid amount can be refunded or applied to next year’s taxes.

4. Check for any state-specific rules

Some states, such as California, provide an automatic extension to file (no separate state extension form is required), but it’s still not an extension to pay. Others require a separate request. For example, in New York, you have to submit a state tax extension Form IT-370. So, confirm with your state tax agency whether a separate form is required.

Step-by-step checklist for a successful tax extension

We’ve gone through a lot of information, so here’s a quick checklist to make sure your tax extension filing goes smoothly:

• Gather your documents: Collect all necessary forms, such as W-2s, 1099s, and any crypto transaction reports (such as Form 1099-A, if you receive one).
• Estimate your taxes: Add up your income, subtract deductions and credits, and calculate what you owe after any withholding or estimated payments.
• File your extension request: File Form 4868 or 7004 by your original filing due date.
• Pay on time: Your payments are still due on the original deadline, so pay what you believe you owe to avoid penalties and interest.
• Check state rules: Some states automatically grant an extension, while others require a separate form and/or payment.
• Stay organized: Use the extra time to review your numbers, and store all tax-related documents in one place. Make sure you’re ready and able to file by your extended tax deadline (typically October 15).

Take the stress out of crypto taxes with CoinTracker

Managing crypto taxes can be complex. If you need more time, an extension gives you breathing room to avoid mistakes. To make filing even easier, CoinTracker helps you track your portfolio, calculate your estimated tax liabilities, and organize your transaction history – all in one place.

Worried about reporting your crypto taxes? CoinTracker makes it simple. Join over two million users who trust us for hassle-free tax reporting. Start for free today!

FAQs

Can I file a tax extension if I owe money?

You can file an extension if you owe taxes, but you still have to pay by the original deadline (usually April 15). If you owe $5,000 and only pay $3,000 by the original due date, the remaining $2,000 will accrue penalties and interest until it’s paid, even if you have an extension.

How can I file a tax extension online?

Online filing provides instant confirmation and faster processing. To avoid the IRS late filing penalty for returns due in 2026, you can:

• File electronically through IRS Free File
• Make a payment through IRS Direct Pay or EFTPS and indicate it’s for an extension
• Use a CPA or tax software

What’s a disaster relief tax extension?

The IRS automatically grants tax extensions to people living in areas affected by federally declared disasters, such as hurricanes, wildfires, and floods. When relief applies, the filing and/or payment deadlines may be extended to give affected taxpayers more time to recover and gather necessary documentation. For information on affected regions and deadlines, visit the official IRS disaster relief page.

Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.