Okay, so we'll go back to the start. Your original code allows for both expressions in the OR statement to be true at the same time. Assuming that [extension due] can be null, we can fine tune the syntax and we create the following...
If(
IsNull([Date Return Filed]) and
(isnull([Extension Due]) AND Today() >[Due Date]) or (not isnull([Extension Due]) AND Today()> [Extension Due]),
"<span style=\"color:#ff0707; font-weight:bold\">"&"OVERDUE"&"</span>"," Else text displayed here"
// end if
)
I'm assuming some things here -- that [Due Date] cannot be null and that [Extension Due] can be null. I'll need your help understanding your requirements in that area better.