Most people think taxes happen once a year in April. For anyone with income that does not get withheld automatically — self-employment, a side business, rentals, investments, partnership or S-corp K-1s — the IRS and the Franchise Tax Board expect you to pay as you earn. Those payments are estimated taxes.

Miss the dates or underpay and you can owe a penalty even if you get a refund when you file. The rules are not mysterious. They are just easy to mix up, especially if you live in California.

What Estimated Taxes Are

Estimated tax is a pay-as-you-go system for income that is not subject to withholding. It covers:

• Federal income tax
• Self-employment tax (Social Security and Medicare)
• Alternative minimum tax, if it applies
• California personal income tax (a separate calculation and a separate payment)

It is not an extra tax. It is the same tax you would otherwise pay in April, split across the year so the government does not wait until you file.

Who Has to Pay Federal Estimated Tax

You generally must make federal estimated payments for 2026 if both of the following are true:

1. You expect to owe at least $1,000 after subtracting withholding and refundable credits.
2. Your withholding and refundable credits will be less than the smaller of:
   • 90% of the tax on your 2026 return, or
   • 100% of the tax on your 2025 return (110% if your 2025 AGI was more than $150,000, or $75,000 if married filing separately).

Common situations:

• Sole proprietors and independent contractors
• Partners and S-corporation shareholders
• People with large capital gains, rental income, or dividends
• Employees whose W-2 withholding is too low

W-2 employees can often avoid estimated payments by increasing withholding on Form W-4 instead. That is usually simpler if most of your income is wages.

Farmers and fishermen have special rules: one payment by January 15, or file and pay by March 1 and skip estimates entirely.

Federal Due Dates for 2026

The IRS does not use clean calendar quarters. The second period is only two months. That trips people up.

Income Period	Due Date
Jan 1 – Mar 31, 2026	April 15, 2026
Apr 1 – May 31, 2026	June 15, 2026
Jun 1 – Aug 31, 2026	September 15, 2026
Sep 1 – Dec 31, 2026	January 15, 2027

If a date falls on a weekend or holiday, it moves to the next business day. You can skip the January 15 payment if you file your 2026 return and pay the balance by January 31, 2027.

How Much to Pay the IRS

There are two practical approaches.

Safe harbor (simplest). Pay one-fourth of last year's total tax each quarter — or 110% of last year's tax if your prior-year AGI was over $150,000. You avoid the underpayment penalty even if this year's tax is much higher. This is what most people should use unless income dropped.

Current-year estimate. Project 2026 income, deductions, credits, and self-employment tax. Use the Estimated Tax Worksheet in Form 1040-ES or Publication 505. Then pay 90% of that projected tax, usually in four equal installments.

If income is lumpy — a big contract in July, a sale in November — use the annualized income installment method (Form 2210, Schedule AI). It matches payments to when the money actually came in. Do not guess equal quarters if your year is uneven.

Self-employment tax is part of the estimate. Rough math:

• Net SE income × 92.35% = SE earnings base
• 15.3% on that base up to the Social Security wage base, plus 2.9% Medicare on everything above it
• Half of SE tax is deductible when you figure income tax

Then add income tax, subtract expected withholding, and divide what remains.

Who Has to Pay California Estimated Tax

California is similar but not the same. You generally must pay if you expect to owe at least $500 after withholding and credits ($250 if married/RDP filing separately), and withholding will fall short of the usual 90%/100% (or 110%) safe harbor.

If your prior-year California AGI was more than $150,000 ($75,000 MFS), the 110% rule applies. If your 2026 California AGI is $1,000,000 or more ($500,000 MFS), you cannot use last year's tax as a safe harbor. You must estimate based on this year's tax.

California Due Dates — The Part People Get Wrong

California uses the same calendar dates as the IRS, but not the same percentages. The split is 30% / 40% / 0% / 30%. There is no September payment for individuals.

Payment	Share of Required Annual Payment	Due Date
1	30%	April 15, 2026
2	40%	June 15, 2026
3	0%	September 15, 2026
4	30%	January 15, 2027

Seventy percent of the year's California estimate is due by mid-June. If you treat California like the IRS and wait for a September check, you are already late on the state side.

You can skip the January 15 California payment if you file the 2026 Form 540 and pay in full by January 31, 2027.

How to Pay

Federal

• IRS Direct Pay (free, from a bank account)
• IRS Online Account
• IRS2Go app
• EFTPS (useful if you already use it for a business)
• Form 1040-ES voucher by mail (slower, easier to mis-date)

California

• FTB Web Pay (free)
• MyFTB account to confirm what already posted
• Form 540-ES voucher by mail to Franchise Tax Board, PO Box 942867, Sacramento CA 94267-0008

Do not combine a federal payment and a California payment. Do not apply a 2025 balance to a 2026 estimate without checking the account. Label every payment with the tax year and form.

Penalties

The underpayment penalty is interest-style, calculated per installment from the due date until you pay or file.

• IRS: Form 2210. Rate floats with short-term federal rates.
• California: currently 7% annualized for estimate penalties (July–December 2026). Same idea — days late × rate × shortfall.

A year-end refund does not wipe out an earlier shortfall. Paying late in December does not fix an April or June miss.

Reasonable-cause relief exists (serious illness, disaster), but "I forgot the California 30/40 split" is not reasonable cause.

Practical Habits That Keep This From Becoming a Mess

1. Park the money when it comes in. A simple rule for self-employed people: move 30–40% of net profit into a separate tax account the day you get paid. Adjust after you run real numbers.

2. Recalculate after a big change. New contract, sale of property, a quiet quarter — update the worksheet before the next due date. You can change the remaining payments. You cannot un-ring a missed earlier one without paying the shortfall plus penalty.

3. Use withholding when you can. If you or a spouse has a W-2 job, extra withholding is treated as paid evenly through the year. That can cover a late-year gain more cleanly than a catch-up estimate.

4. Keep federal and California calendars separate. September 15 is a real IRS date and a $0 California date. January 15 is real for both.

5. Match payments to income timing if the year is uneven. Equal quarters on a seasonal business is how people get Form 2210 notices.

6. Confirm postings. IRS Online Account and MyFTB show what they actually received. Bank "sent" is not the same as "applied to 2026 estimate."

If You Run a Small Business or Handle Payroll

Estimated tax is the owner's personal income tax and self-employment tax. It is not payroll tax, and it is not the business's estimated corporate tax. Mixing those buckets is a common error.

If the business is a C-corporation, the corporation pays its own estimated tax on Form 1120-W — separate from anything the owner pays personally.

Questions? We Can Help.

Estimated taxes are one of the most common sources of surprise bills and penalties we see at Automated Business Service. If you are not sure whether you owe, how much to pay, or whether you are behind for 2026, give us a call at (760) 947-8060 or stop by 16501 Walnut St., Ste. 1, Hesperia. The Q4 deadline is January 15, 2027 — there is still time to get it right.