Fourth quarter estimated tax is the payment covering income earned from September 1 through December 31, and for the 2026 tax year it is due January 15, 2027. The amount to set aside depends on net income, self-employment tax, and which safe harbor you are using, not on a single flat percentage. Business owners with uneven income or multi-state exposure often need a more precise calculation than a rule of thumb.
Table of Contents
- When is the fourth quarter estimated tax payment due?
- How much should I set aside from each payment I receive?
- What is the 90% rule for estimated tax payments?
- How do I calculate the fourth quarter payment if my income changed during the year?
- What happens if I underpay estimated taxes?
- What should I set aside beyond federal income tax?
- How can Spencer Accounting Group help me get current before January?
- Key Takeaways
- References
When is the fourth quarter estimated tax payment due?
The fourth quarter estimated tax payment covers income earned from September 1 through December 31 and is due January 15 of the following year. For the 2026 tax year, the payment covering September 1 through December 31, 2026 income is due January 15, 2027, according to Fidelity.
When a due date falls on a Saturday, Sunday, or legal holiday, the payment moves to the next business day, according to the IRS. Due dates shift year to year and should be confirmed for the current tax year. The fourth quarter payment is the one that catches many owners off guard because it lands right after year-end, when cash flow is already stretched.
How much should I set aside from each payment I receive?
A common rule of thumb is to save 25% to 30% of net income for taxes, according to JCCS CPA. Setting aside an additional 5% to 10% on top of estimates covers unexpected income spikes or tax law changes. The figure is based on net income, not gross revenue.
Self-employment tax of 15.3% on net earnings from self-employment applies to business owners and is part of what gets set aside, according to the IRS. That 15.3% covers Social Security and Medicare. Owners who only set aside for income tax and forget self-employment tax will come up short in January.
What is the 90% rule for estimated tax payments?
Paying at least 90% of total tax during the year ordinarily avoids the estimated tax penalty, according to the IRS. The safe harbor alternative is paying 100% of the prior year's tax, or 110% for higher adjusted gross income thresholds.
Adjusted gross income, or AGI, is total income minus certain adjustments like retirement contributions and student loan interest. The 110% threshold applies when AGI was over $150,000 for most filers, or over $75,000 for married filing separately, according to TurboTax. Withholding from wages or other sources counts toward these thresholds, which matters for owners with a spouse who has W-2 income.
How do I calculate the fourth quarter payment if my income changed during the year?
The prior-year method uses four equal payments based on last year's tax, with a higher-income add-on. Under that method, a business owner who owed $20,000 last year would make four equal payments of $5,000 each quarter, while a higher earner with an AGI over $150,000 would add 10% and divide by four, according to Fidelity.
The annualized method bases each payment on income actually earned so far that year and suits owners whose income fluctuates substantially from quarter to quarter, according to Fidelity. Payments can also be made more often than quarterly, including monthly. Catching up after a missed date is possible, but a penalty may still apply, according to TurboTax.
What happens if I underpay estimated taxes?
The penalty is calculated on the underpayment amount, the length of the delay, and the current IRS interest rate, according to JCCS CPA. A penalty can apply even if the return ends up showing a refund. The penalty is a cash-flow and compliance issue, not a judgment on the business.
Owing more than $1,000 in federal tax for the year generally triggers the estimated payment requirement, according to TurboTax. Owners who underpaid earlier in the year can reduce the damage by making the fourth quarter payment as accurate as possible. The IRS treats taxes as pay-as-you-go, meaning most tax must be paid during the year as income is received, according to the IRS.
What should I set aside beyond federal income tax?
Estimated payments cover both income tax and self-employment tax, which includes Social Security and Medicare, according to the IRS. State estimated tax thresholds and due dates can differ from federal ones and may be lower, according to JCCS CPA.
Businesses selling across state lines may face sales tax obligations that are separate from income tax estimates. Multi-state sales tax exposure is often the piece owners miss when budgeting for January. A business can be current on income tax estimates and still carry a multi-state sales tax liability that needs its own resolution plan.
How can Spencer Accounting Group help me get current before January?
Spencer Accounting Group is a 100% virtual firm serving clients in any state or country, with no office visit required. For owners carrying multi-state sales tax exposure, Sales Tax Resolution includes nexus review, exposure quantification, voluntary disclosure, and getting current with each state. For owners behind on returns, Back Tax Return Filing sequences catch-up filings to get compliant with the least disruption.
On the forward-looking side, Strategic Tax Planning and Bookkeeping work together so the January number is designed rather than discovered. Clean monthly books make the fourth quarter estimate a calculation, not a guess. The goal is to walk into January with the payment funded and the state exposure mapped.
Key Takeaways
- The fourth quarter estimated tax payment covers income earned September 1 through December 31 and is due January 15 of the following year.
- For the 2026 tax year, that fourth quarter payment is due January 15, 2027.
- Paying at least 90% of total tax during the year ordinarily avoids the estimated tax penalty.
- A common rule of thumb is to set aside 25% to 30% of net income, plus 5% to 10% as a buffer.
- Self-employment tax of 15.3% on net earnings is part of what estimated payments cover.
- The penalty is based on the underpayment amount, the delay, and the IRS interest rate, and can apply even when a refund is due.
- State estimated tax thresholds and due dates can differ from federal ones, and sales tax obligations are separate from income tax estimates.
References
- Pay as you go, so you won't owe: A guide to withholding, estimated taxes and ways to avoid the estimated tax penalty — IRS
- Estimated Taxes: How to Determine What to Pay and When — TurboTax, November 1, 2026
- Estimated tax payments and quarterly tax guide — Fidelity, January 14, 2026
- Don't Let Quarterly Estimated Tax Payment Obligations Catch You Off Guard — JCCS CPA, May 19, 2025