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Tax Planning Resource Center

Estimated tax payments and the safe harbor rules

Business owners, investors and anyone with significant income outside wages need to pay tax during the year. The safe harbor rules make it predictable.

Updated November 2026 · VG CPA PC advisors

Due dates

Individual estimated payments are due April 15, June 15, September 15 and January 15 of the following year. Payments can be made online through IRS Direct Pay or EFTPS. Corporations have their own schedule based on their tax year.

States with income taxes generally have similar quarterly requirements and their own safe harbors.

The safe harbors

You avoid the underpayment penalty if your withholding and timely estimates equal at least 90% of this year's tax or 100% of last year's tax. If last year's adjusted gross income was over $150,000 ($75,000 married filing separately), the prior-year safe harbor is 110%.

Paying based on last year's tax is the simplest way to avoid penalties in a year when income rises unexpectedly; any balance is then due by April 15.

Annualizing and withholding

If income is uneven, such as a large gain late in the year, the annualized income installment method on Form 2210 Schedule AI can reduce or eliminate penalties by matching payments to when income was earned.

Withholding is treated as paid evenly through the year regardless of when it occurs, so increasing withholding from wages or an IRA distribution late in the year can fix a shortfall from earlier quarters.

Questions

Frequently asked questions

What is the underpayment penalty rate?

It is calculated like interest at the federal short-term rate plus 3%, for the period each installment was late.

Do S corporation owners pay estimates?

Usually yes, on their share of business income, unless salary withholding covers it.

Can PTET payments count?

PTET payments are made by the entity and reduce state tax for owners; they do not count as the owner's federal estimate.

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