If you haven’t filed your federal income tax return yet, then panic. Hide. Run for the hills. After all, you know that the April 18 deadline is approaching faster than Kanye can spend 53 million dollars. In all seriousness, if you are not submitting your taxes by Tax Day, then you should consider filing Form 4868, the Application for an Automatic Extension of Time, with the IRS.

In addition to your federal taxes, you may be required to make separate extension filings for your state tax or other returns specific to the state(s) in which you have a tax nexus. Be sure to check the specific requirements for filing extensions in the states in which you live and do business.

While filing an extension buys you six months (making your tax return due on Oct. 17), it doesn’t remove the obligation of paying your taxes on time. Nice try, though!

You must either: a) estimate what you owe and pay it now; or b) pay later and be subject to interest on the tax you owe and, potentially, late-payment penalties.

Which option should you choose? Let’s take a closer look at each one:

*Option A: File an extension and pay estimated taxes now. *This may be the best option if you have enough information to estimate the taxes you owe, but you are simply missing a piece of documentation or need time to get your act, aka your documentation, together.

As a freelance business owner, you should be prepared to pay estimated taxes anyway, right? So if missing paperwork is holding you up from submitting your tax return, then filing for an extension makes sense. That way you will avoid the late-payment penalty and failure-to-file penalty.

Option B: File an extension and pay later. You don’t want to choose this option unless you absolutely have to. Here’s why:

You will pay interest on any tax owed that is not paid by April 18 until it is paid. The IRS interest rate on underpayments changes quarterly, but it is usually around 3 percent—adding to your financial burden.

You may also face a late-payment penalty charge, unless you can prove that you have a reasonable cause for not paying on time. Usually “reasonable cause” means catastrophic occurrences such as the death of an immediate family member, a major illness, or if your tax documentation was destroyed in a fire or some other disastrous event.

Get more expert tax advice (it's free!)

Go to our Tax Resource Center

Reduce your pain: It’s better to apply for an extension than to do nothing at all

While Option A is obviously more desirable than Option B, filing an extension and paying later is much better than not filing a tax return at all. If you do not file a return or apply for an extension by the April 18 deadline subject to a failure-to-file penalty, which is significantly more costly than the failure-to-pay penalty.

The failure-to-file penalty is 5 percent per month or partial month, up to a maximum of 25 percent of what is owed. Even if you have a relatively small unpaid tax bill, you will still be subject to this penalty if you don’t file on time. If you file later than 60 days after the April 18 deadline, the minimum penalty rises to the smaller of $135 or 100 percent of the unpaid tax.

Keep in mind this penalty is on top of any other interest charges or late-payment penalties that you are assessed. Plus, you have to 1) be good at and 2) enjoy math to figure all those penalty numbers out!

There are options for those who just can’t pay their taxes right now

If you just don’t have the money to pay your taxes, try one of the following options:

You could open and pay with a new credit card that offers no-interest for a period of time (note that the IRS does charge a convenience fee for paying with a credit card). This is a good idea as long as you can pay it off in full before interest is applied on your balance.

Alternatively, you could ask for a loan from a family member, friend, financial institution or that TV preacher you sent all your money to awhile back (kidding—I hope). In addition, the IRS will work with you, offering payment plans to help you meet your tax payment obligations.

Take action now…file an extension before the April 18 tax deadline passes

If you are not going to be able to file your taxes by April 18, then taking a long vacation to a foreign country sounds nice. Costa Rica anyone?

All joking aside, applying for an extension—and either fully or partially paying the taxes you owe—makes your situation much better vs. doing nothing and being subject to stiff penalties. In any case, if you haven’t filed your taxes yet seek the advice of a tax professional to ease your immediate burden—and get you back on track for next tax season.

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.