Estimated Tax Payments
Knowing just how much you need to pay in estimated tax payments is harder than it appears to be. The IRS and other tax authorities require you to make certain estimated tax payments during the tax year. Those estimated taxes are impacted by your withholdings, regardless of where they come from (wages, retirement, and taxes withheld on other income). Your current year (last year?) income and expected withholdings drive the safe harbor estimated taxes we calculate with your tax return(s).
What's a safe harbor? Does have safety boats?
Taxes, and especially estimated tax payments, have certain, “safe harbors.” A safe harbor is just a certain parameter that, if met, will protect you from certain penalties.
When it comes to estimated taxes, the safe harbor is defined by the tax authority. The most complicated one in the US is for federal taxes. Other tax authorities will have their own safe harbors that usually follow the federal rules fairly closely.
The First Safe Harbor
If your current year tax return (in the 2026 filing season, that’s your 2025 tax return) has less than $1,000 due before any estimated tax payments, you are not required to make estimated tax payments. We may still calculate estimated taxes if your income is expected to change significantly from one year to the next.
If, however, that magic number is more than $1,000, you will need to make estimated tax payments.
The Prior Year or 100/110% Safe Harbor
When we calculate estimated taxes, we usually rely on this safe harbor first.
Our goal: have you pay in at least 100 (or 110% for higher income earners) of the last year’s tax in equal installments on April 15th, June 15th, September 15th, and January 15th of the following year.
The math? We look at last year’s total tax due, subtract withholdings, round, divide by four, and we might round again.
If we know about simple, straightforward changes, we’ll do what we can to incorporate those. If your changes are signficant, we may offer a separate engagement to project next year’s income more accurately.
The Current Year or 90% Safe Harbor
The other safe harbor we rely on when looking at estimated tax payments is the 90% rule. That is, so long as you pay in at least 90% of your current year tax due (2026 in the 2026 filing season), you’ll be protected from underpayment of estimated tax penalties if you owe tax on your 2026 tax return.
We don’t usually rely on this safe harbor unless we’re actively projecting forward for the current year and doing it regularly or there’s a significant decrease in income (i.e. there was a rather large gain on the sale of something last year that won’t happen again this year).
I'm good at math. Can I just math my way to that 90%?
Sure. You can. But we don’t recommend it.
No one’s crystal ball is terribly high quality. And we can’t make you do (or not do) anything. But, we can give you our most-best recommendation based on the engagement(s) you’ve opted into and our best knowledge.
That does mean you might be overpaid in tax and receive a refund in the next year. If you’re going through the year and think this might be you, reach out to us about what’s going on. We likely have a solution for you.
When do I get these Estimated Payments?
You might receive estimated tax payments twice:
- Once with your extension
- Once with your tax return.
If your tax return is extended, we provide you with safe harbor estimated tax payments for the entire year with your extension. When we’re finalizing your tax return, we’ll ask you about any estimated tax payments you’ve already made and reclaculate the remaining estimated payments based on that information.
What about states? Do they have safe harbor rules?
State (and local) tax authorities have their own safe harbor rules for estimated tax payments. In most cases, they’re a simplification of the federal rules. Some states have their own rules. We always look at your state’s estimated tax payment rules to help you stay in compliance, avoid penalties, and take advantage of tax law.
When are Estimated Taxes due?
Estimated taxes are due four times a year, every year:
- April 15th (yes, that the same day your taxes and your tax return are due)
- June 15th
- September 15th
- January 15th (of the following year)
If the 15th falls on a weekend or holiday, the due date is pushed back to the next business day.
My job withholds taxes. How does this impact my estimated payments?
If you had withholding in the prior year (2025 for the 2026 filing season), we’ve already factored in similar withholding for your 2026 safe harbor estimated tax payments.
If you have a significant job change – an increase or decreate in income, self-employed to employed, or employed to self-employed, we may advise updating your estimated tax payments during the year. You don’t have to opt in to this – we’ll still provide you with those safe harbor payements. But, those safe harbor payments may not match with the withholding changes reflected in your salary.
We will almost never advise against making estimated tax payments prepared with your tax return without a separate projection or planning engagement. Without data from you, and effort from us, it is irresponsible of us to do so.
Is there any strategy with withholding and estimated tax payments?
There could be! We don’t usually recommend updating your withholding directly if you have an appropriately completed W4. Prior to the tax law changes from 2017, updating withholding was a consistent and somewhat reliable method to keep your estimated tax payments down. For close to a decade though, fussing with your withholding has been less reliable.
The exception to this: if you own an S-Corporation and we’re working closely together on year-end salary, withholdings, and estimated tax payments, this strategy can work really well.
You only gave me three estimated payments. Where's the April 15th payment!?
If your tax return is extended, we’ll, “roll,” your first quarter estimated tax payments into your extension payment. Your Summaries & Comparisons (20XX EXT Form XXXX (Summaries & Comparison) – Name(s) on the Tax Return) will show you the estimated tax liability, first quarter estimated tax payment, and total recommended payment.
You can choose to split your extension payment up from your estimated tax payments. You can choose to only pay your extension payment. That choice is yours.
We roll your first quarter estimated tax payments into your extension payment because it makes the payment process a little easier for you – it’s just one payment made for the actual tax return. We apply the excess to next year’s estimated taxes when we’re finalizing your tax return.
Safe harbor estimated taxes prepared with your extension and your tax return are a starting point for next year’s taxes. They’re not foolproof, but they are based on facts and guidance from tax authorities.
This post has been developed as a generic explanation of safe harbor estimated tax payments. This information is written to be informative and is not tax advice. You should consult with your tax advisor as to how this information applies to your situation. Your specific needs may vary and may cause specific attention to need to be given to your processes. You should speak with your tax professional regarding the applicability of these issues to you and your business (and, yes, that includes Crayon Advisory if you are a current or onboarding client).
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