If you’re self-employed or run a small business, September 15, 2026 is your next quarterly estimated tax deadline — it covers income earned June 1 through August 31. Most business owners know the date. Fewer know the rule that actually determines whether they owe a penalty.
The rule people get wrong
The IRS doesn’t require you to guess your tax bill perfectly. It gives you a safe harbor: pay the smaller of two numbers, and you’re protected from an underpayment penalty even if you end up owing more at filing time.
You’re covered if your withholding and estimated payments add up to at least:
- 90% of the tax you’ll owe for the current year, or
- 100% of the tax you owed last year — or 110% of last year’s tax if your adjusted gross income last year was over $150,000
Whichever of those is smaller is the number you need to hit. That last piece — the 110% threshold — is where a lot of business owners get caught off guard.
The trap: a good year working against you
If your income jumped this year, your instinct might be to estimate based on what you expect to owe now. But if your prior year’s AGI was above $150,000, the safe harbor math shifts to 110% of last year’s tax, not 100%. Business owners who don’t realize this often underpay without meaning to, because they’re anchoring on this year’s numbers instead of last year’s.
The reverse is also true: if this year is slower than last year, paying based on last year’s tax (100% or 110%) can mean sending the IRS more than you need to for a safe harbor. In that case, paying 90% of your realistic current-year estimate may be the better move — as long as you’re confident in that estimate.
Why this matters beyond the penalty
The IRS is explicit that you can be charged a penalty for underpayment even if you’re due a refund when you file. The penalty and the refund are calculated separately. A business owner who pays too little quarterly and gets a refund in April can still have paid an underpayment penalty along the way.
What to check before September 15
Before the deadline, look at three things:
- What your actual tax liability was last year, and whether your AGI put you in the 100% or 110% safe-harbor bracket.
- Whether this year’s income is meaningfully higher or lower than last year’s — because that determines which safe-harbor path actually protects you.
- Whether your total withholding and estimated payments so far this year are already close to whichever threshold applies to you.
If you expect to owe at least $1,000 in tax this year after subtracting withholding and refundable credits, and your payments aren’t tracking toward one of these safe-harbor numbers, this is the deadline to close that gap — not January, and not next April.
This post explains the general IRS safe-harbor framework for estimated taxes. Every business’s numbers are different — if you’re not sure which threshold applies to you, that’s exactly the kind of question worth a real conversation before the 15th, not a guess.
Source: IRS.gov, “Estimated Taxes” FAQ (verified 2026-09-09).
