Jonathan Medows is a New York City based CPA who specializes in taxes and business issues for consultants across the country. His website, www.cpaforfreelancers.com, has a resource section with how-to articles and information for freelancers.

For many of us, last spring is just a memory—but for those of us who elected to file for an extension on our personal tax returns (Form 1040) at that time, the reality of making the decision to do so is now here: Individual tax returns granted an extension must be filed by October 15.

If you applied for an extension last April (by completing Tax Form 4868, Application for Automatic Extension of Time To File U.S. Income Tax Return by the tax filing deadline), now is the time to avoid the penalties listed below by preparing your taxes to be filed by the October 15 deadline.

If you didn’t apply for an extension last April and you figure it’s too late anyway, you’ll just wait until next tax season to file, ignore that thought completely—do not delay filing your taxes. The real—and costly—consequences of not filing when your taxes are due, or not paying them in full, will only worsen the longer you wait.

While the IRS does give tax payers some leniency by granting personal tax return extensions in the first place, it is not at all lenient when it comes to the penalties it imposes for late payment of tax or for late filing of a tax return. The IRS also stands firm when it comes to charging interest on any unpaid tax, which can really add up, giving the bottom line of your bank account a significant blow.

Consider the following penalties individuals who do not file on time or who do not pay their taxes may be subject to.

Penalty 1: Failure to Pay Your Personal Taxes by the October 15 Deadline

For any personal tax that is unpaid as of the extension due date, you will be assessed a late payment penalty. Even if you pay some of your taxes, the penalty will still apply to the unpaid portion. The IRS will impose a failure-to-pay penalty of 0.5 percent for each month or part of a month that the tax remains unpaid. However, the late payment penalty cannot exceed 25 percent of the net amount of the tax due.

Penalty 2: Failure to File Your Personal Tax Return by the October 15 Deadline

If you file your tax return after the due date, a late filing penalty will apply to any portion of the taxes you owe which are unpaid as of the payment due date. The late filing penalty is based on the net amount of tax due on your personal tax return.

The failure-to-file penalty is calculated from the deadline of your tax return (in this case October 15, 2014 if you filed an extension) to the date you file your tax return. The penalty is a stiff 5 percent for each month or part of a month that the tax return is late, up to a maximum penalty of 25 percent.

If you are wondering what happens if you don’t file and you don’t pay your taxes on time, rest assured, the IRS has the answer: If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty. However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

Penalty 3: Interest Charges

Just like a loan or credit card payment, interest is typically added to any unpaid tax from the time that the payment of tax was due until the date the tax is paid. Interest rates are set by the IRS every three months. Currently, the IRS interest rate for underpayments of tax is 3 percent per year. The interest is calculated for each day your balance due is not paid in full and is assessed on the unpaid amount of tax plus any late filing or late payment penalties. Adding interest charges to the other penalties discussed above can certainly put a dent in your bank account, so prepare now to file your taxes before the October 15 extension deadline.

Can You Get Tax Penalty Relief?

The IRS may waive failure-to-file and failure-to-pay penalties if the taxpayer can prove there was a reasonable cause for the late payment (and a reasonable effort was made to conserve funds for tax payments).

Like the failure-to-pay penalty, the failure-to-file penalty can be waived at the discretion of the IRS, if it can be proven that the failure to file a tax return on time was due to a reasonable cause.

However, take this as a cautionary warning, establishing reasonable cause when it comes to non-payment and late payment of taxes is more difficult than you might think.

What to Do if You Can’t Afford Your Taxes

Ideally, to protect yourself from paying tax penalties you should file your tax return by the extension deadline of October 15 with full payment. If you are avoiding filing because you don’t have the cash to pay tax, the best course of action is still to file a return since the failure-to-file penalty is generally more than the failure-to-pay penalty.

If you cannot pay all the taxes you owe, you will still want to file your tax return on time and pay as much as you can, then look into other payment options. While the IRS may seem intimidating, with the proper documentation and, if needed, professional representation, they will work with individuals to create an affordable payment plan.