Quarterly estimated taxes for business owners

The US tax system is pay as you go. An employee pays through withholding on every paycheck. A business owner whose profit has no withholding pays through estimated tax, four times a year. Miss them and you owe a penalty even if you pay everything in April.

Who has to pay

The 2026 Form 1040-ES puts the line at $1,000. If you expect to owe at least that much for 2026 after withholding and credits, you generally have to make estimated payments. Got a sole proprietorship, a single-member LLC or a partnership share that actually makes money? You're probably over it.

An S corp owner often doesn't, or less so. Salary runs through payroll with withholding, and the owner can set the withholding high enough to cover tax on the distributions too. The K-1 profit has no withholding of its own, so an owner who takes a small salary usually still needs estimated payments.

Estimated tax covers income tax and self-employment tax together.

2026 due dates

Yes, the periods are lopsided. The second one is two months long and the fourth is four. One shortcut from the 1040-ES: file your 2026 return by February 1, 2027, pay the whole balance with it, and you can skip the January payment.

To pay, use IRS Direct Pay, your IRS online account, EFTPS, or a debit or credit card. The IRS estimated taxes page lists the options.

How much: the safe harbors

You avoid the penalty if your withholding and timely estimated payments add up to at least the smaller of:

• 90% of the tax on your 2026 return, or
• 100% of the tax on your 2025 return.

There's a catch for higher earners. Was your 2025 adjusted gross income over $150,000 ($75,000 married filing separately)? Then the second figure is 110%, not 100%.

The prior-year rule is the easy one. You know last year's tax, so you divide it by four and pay that each quarter, even if this year's profit jumps. You will owe the rest in April, but no penalty.

Worked example

Take an owner who paid $18,000 of total tax on the 2025 return, with a 2025 AGI of $120,000.

Bump that AGI to $160,000 and the target is 110% of $18,000. That's $19,800, or $4,950 a quarter.

If 2026 profit drops, 90% of the 2026 tax might be the smaller number, and then paying less is fine. The trouble is you don't know that number until the year is over.

The penalty

The penalty is figured on Form 2210 (Topic 306). The Form 2210 instructions say it is figured separately for each installment due date. It works like interest: the amount you underpaid, times the number of days it stayed unpaid, times the IRS underpayment rate. For the fourth quarter of 2026, the IRS set that rate at 7% a year for individuals.

Say you're $3,000 short on the September 15 payment and catch up 90 days later. You owe about $3,000 × 7% × 90 / 365 = $51.78.

Small, but it adds up across a year of missed quarters, and it is the most avoidable cost on this whole site.

Farmers and fishers have their own rule with one payment due January 15. The 1040-ES covers it.

Uneven income

If most of your profit comes late in the year, equal quarterly payments may be more than you need early on. The annualized income installment method on Form 2210 lets you match payments to when you earned the money. It takes more work, and you need to file Form 2210 with your return to claim it.

C corporations

A C corp pays its own estimated tax. Publication 542 says a corporation must make estimated payments if it expects its tax for the year to be $500 or more. The due dates are the 15th day of the 4th, 6th, 9th and 12th months of its tax year. On a calendar year that's April 15, June 15, September 15 and December 15. Underpayment is figured on Form 2220.

S corps and LLCs generally don't make federal estimated payments for themselves, since the owners pay the tax. Some states require the entity to pay for nonresident owners, or charge entity-level taxes with their own estimated payments.