It is the 15th of the month, and a bill from the IRS you did not budget for is suddenly due. Or worse, April arrives and you learn you owe thousands in tax plus an underpayment penalty, because nobody told you that self-employed owners are expected to pay taxes throughout the year. If that sounds familiar, you are in good company. Quarterly estimated taxes catch a lot of first-year owners off guard.
This guide explains who has to pay estimated taxes, when the 2026 payments are due, how to calculate them without overpaying, and how clean books make the whole process far less painful.
What Are Quarterly Estimated Taxes?
The US tax system is pay-as-you-go. Employees have tax withheld from every paycheck. Business owners who are not on a payroll withholding system, such as sole proprietors, partners, LLC members and S-corporation shareholders with pass-through income, must send the IRS their tax in installments during the year. These installments are called estimated taxes, and they cover both income tax and self-employment tax (Social Security and Medicare, currently 15.3% on net self-employment earnings up to the annual wage base, with Medicare continuing above it).
C-corporations follow a similar rule but use Form 1120-W and generally pay their own corporate income tax in installments.
Who Needs to Pay Estimated Taxes?
According to IRS guidance (see IRS Publication 505 and Form 1040-ES instructions), you generally must make estimated payments if both of the following apply:
- You expect to owe at least $1,000 in tax for the year after subtracting withholding and refundable credits.
- Your withholding and credits will be less than the smaller of 90% of your 2026 tax or 100% of your 2025 tax (110% of your 2025 tax if your 2025 adjusted gross income was over $150,000).
If you also have a W-2 job, you can sometimes avoid estimated payments by raising your withholding with a new Form W-4 instead.
2026 Estimated Tax Due Dates
For individuals and pass-through owners on a calendar year, the four payment deadlines are:
- Q1: April 15, 2026 (income earned January 1 to March 31)
- Q2: June 15, 2026 (April 1 to May 31)
- Q3: September 15, 2026 (June 1 to August 31)
- Q4: January 15, 2027 (September 1 to December 31)
Notice the periods are uneven, which is why the payments are not strictly “quarterly.” If a due date lands on a weekend or federal holiday, it moves to the next business day. Because the final 2026 payment is coming up in January, now is the right time to review where you stand. For a broader view, see our services overview and our deadline calendar post.
How to Calculate Your Estimated Payments
Method 1: The Safe Harbor Method (Simplest)
The IRS will not charge an underpayment penalty if you pay at least the smaller of 90% of this year’s tax or 100% of last year’s tax, spread across the four installments. High earners (prior-year AGI above $150,000) must use 110% of last year’s tax. Say your 2025 total tax was $20,000. Paying $5,000 each quarter satisfies the safe harbor, even if 2026 turns out to be a much better year. You would simply settle the difference when you file.
Method 2: Estimate Current-Year Income
If your income is dropping or irregular, projecting your actual 2026 profit may produce lower payments. The steps are:
- Pull your year-to-date profit and loss report from your accounting software.
- Project profit for the full year, adjusting for seasonality.
- Subtract the deductions you expect, including half of self-employment tax and any qualified business income (QBI) deduction.
- Compute income tax and self-employment tax using the Form 1040-ES worksheet.
- Divide by four, or use the annualized income installment method (Form 2210, Schedule AI) if your income is lumpy.
Example: a freelance designer projects $90,000 of net profit. Self-employment tax is roughly $90,000 x 92.35% x 15.3% = about $12,700. Add federal income tax of perhaps $9,000 after deductions, and the annual bill lands near $21,700, or about $5,400 per quarter. Your own figures will differ based on filing status, state, and deductions, so treat this as an illustration, not advice.
How to Pay
- IRS Direct Pay from your bank account at no cost.
- EFTPS, the Electronic Federal Tax Payment System, which lets you schedule payments in advance.
- Your IRS online account, which also shows payment history.
- Check or money order with a Form 1040-ES voucher.
Do not forget your state. Most states with an income tax have their own estimated payment schedule, and several require payments on different dates than the IRS.
Common Estimated Tax Mistakes
- Treating the tax money as spendable cash. Move a fixed percentage, often 25% to 30% of profit, into a separate savings account every time you get paid.
- Forgetting self-employment tax. Many owners only estimate income tax and come up short.
- Using revenue instead of profit. Estimates are based on net income, not deposits.
- Skipping Q4. The January payment is the one most often missed.
- Relying on outdated books. If your bookkeeping is three months behind, your estimate is a guess.
That last point is where most of the trouble starts. Accurate, current books let you pull a reliable year-to-date profit figure in minutes. If yours are behind, our bookkeeping services can catch you up, and we work in both QuickBooks and Xero.
A Simple Quarterly Routine
- Close the month’s books and reconcile bank and credit card accounts by the 10th.
- Review year-to-date net profit and compare it with your projection.
- Set aside your tax percentage from every deposit.
- Make the payment at least a few days before the deadline and save the confirmation.
- Record the payment correctly: federal estimated payments for a sole proprietor are an owner’s draw, not a business expense.
Frequently Asked Questions
What happens if I miss an estimated tax payment?
The IRS charges an underpayment penalty, calculated like interest on the shortfall for the period it was unpaid. The rate is set quarterly and tied to the federal short-term rate. The penalty is usually modest if you catch up quickly, and you can compute it on Form 2210.
Are estimated tax payments tax deductible?
No. Estimated payments are a prepayment of your tax, not a business expense. They are credited to you when you file your return. Your accountant should record them as owner’s draws or tax payments, not an operating expense.
Do S-corporation owners pay estimated taxes?
Usually yes, on the pass-through income reported on their personal return. However, S-corp owners who take a reasonable W-2 salary can often cover much of their liability through payroll withholding. Our payroll services can help you set that up.
Can I just pay everything in April?
You can, but if you were required to make estimates you will likely owe a penalty. The only fully safe approach is to meet a safe harbor or pay on schedule.
Get Your Numbers Ready Before the Next Deadline
Estimated taxes are far easier when your books are current and you know exactly what you owe. This article is general information and not tax advice; your situation, state rules and the latest IRS guidance matter, so please confirm with a CPA or enrolled agent. If you want help, review our pricing or contact Ask For CPA today and we will get your bookkeeping in order before the next payment is due.
