Estimated taxes are due September 15. The IRS charges 7% to miss.
The IRS assessed $12.1 billion in estimated tax penalties last year. Skipping the September 15 payment costs 7%, compounded daily, and January won't fix it.
The Editors · 9 min read ·
Your third estimated tax payment for 2026 is due Tuesday, September 15. It covers what you earned between June 1 and August 31, and you owe it if you expect to finish the year owing at least $1,000 after withholding and refundable credits (Form 1040-ES, 2026).
Miss it and the IRS charges 7% on the shortfall, compounded daily. That rate is locked through the end of the year (IR-2026-98, 21 August 2026). On a $4,000 gap carried to January 15, the arithmetic comes to about $95.
So the cost is small. The mechanic behind it is what catches people. The penalty is figured separately for each due date, which means money you send in January does nothing for a hole you left in September. The IRS writes it plainly in the Form 2210 instructions: you may owe the penalty for an earlier due date even if you paid enough tax later to make up the underpayment, and that holds even when you're due a refund.
Enough people learn this the hard way to move real money. In fiscal 2025 the IRS assessed 15,734,656 estimated tax penalties against individual and estate and trust income taxes, worth $12,060,514,000 (IRS Data Book 2025, Table 4-2). That averages $766 a hit.
What the September 15 payment is actually for
The year splits into four windows, and each one has its own deadline. The third runs June 1 to August 31 and settles on September 15. The fourth covers September through December and is due January 15, 2027, unless you file your full 2026 return and pay the balance by February 1, in which case you can skip it.
The trigger is the $1,000 rule. If you expect to owe at least that much when you file, after withholding and refundable credits, you're in the system. Freelance income, creator payouts, contract work, capital gains, crypto sales: none of it arrives withheld, so it all lands here.
One quiet change makes 2026 worse than it looks. The 1099-NEC reporting threshold moved up to $2,000, so a lot of freelancers will get paid this year without ever receiving a form that reminds them the money was taxable. The reporting threshold moved; the tax didn't. Self-employment tax still starts at $400 of net earnings.
The penalty is interest, and it's priced at 7%
Calling it a penalty makes it sound punitive. It behaves like a loan. The rate for non-corporate underpayments is the federal short-term rate plus three points, reset every quarter. It ran 7% in Q1 2026, dropped to 6% in Q2, and has sat at 7% since 1 July (quarterly interest rates, IRS). The announcement on 21 August held it at 7% through December.
Compounded daily on a $4,000 shortfall, that works out to roughly 77 cents a day. Here is what the same gap costs depending on when you close it.
Scale it and the shape holds: a $1,500 gap carried to January 15 costs about $36, a $10,000 gap about $237. The Q1 2027 rate isn't set yet, so anything past 31 December is an estimate at today's rate.
Read that next to what your cash earns while you sit on it. The best savings accounts paid 4.50% on 10 September, against an FDIC national average of 0.38% (Fortune). Borrowing from the IRS at 7% to park money at 4.50% loses about two and a half points a year. If the money is there, send it. If it isn't, you now know the price of waiting, and it's cheaper than almost any card you'd borrow it on.
Paying more later doesn't cure September
This is the rule most deadline coverage skips, and it's the one that costs money.
Each installment is tested on its own. The IRS applies your payments to the oldest underpayment first, even when you label a payment for a later quarter, and it counts the days each shortfall stayed open. A freelancer who earns nothing until October, then sends one enormous payment on January 15, has still underpaid three earlier installments and pays interest on all three.
That's also why "I'll true it up at filing" is a more expensive plan than it sounds. The same $4,000 gap carried to April 15, 2027 costs about $165 instead of $95, because the clock runs from 16 September either way.
The safe harbor is the cheapest insurance in the tax code
There's a way to stop guessing. Pay in at least the smaller of two amounts and the penalty can't touch you, no matter what your actual 2026 tax turns out to be:
- 90% of the tax shown on your 2026 return, or
- 100% of the tax shown on your 2025 return.
If your 2025 adjusted gross income was over $150,000 ($75,000 married filing separately), the second number becomes 110% of your 2025 tax.
The prior-year option is the useful one, because you already know it. Take your total tax from line 24 of your 2025 Form 1040, divide by four, and you have a number that buys immunity even if 2026 turns out to be your best year ever. A creator who made $60,000 in 2025 and $200,000 in 2026 can prepay against the smaller year and settle the rest in April with no penalty at all.
The trade is cash flow. You're handing the government money early to remove a risk. At 7%, that trade is usually worth it.
If your income is lumpy, Schedule AI exists
The safe harbor assumes four equal payments. Freelance income rarely arrives in four equal pieces.
For that, the IRS built the annualized income installment method: Schedule AI on Form 2210. It recomputes each required installment against what you actually earned in that window, so a quiet summer followed by a big Q4 stops producing penalties for quarters where you had no income to pay from.
It comes with a trap. Use Schedule AI for one payment date and you must use it for all four, which means tracking income, deductions and credits by period across the whole year rather than once in April. It also builds its own self-employment tax calculation per period. That's real bookkeeping. For a seasonal business or anyone who books one large project a year, it's usually worth the hours.
What the numbers say about getting out of it
Two figures from the Data Book, read together, argue against optimism.
The IRS abated 215,192 estimated tax penalties in fiscal 2025, worth $253,469,000. Against what it assessed, that's 1.4% of the penalties and 2.1% of the dollars. Waivers exist for casualty, disaster, retirement after 62 and disability, and they get granted. They are not a plan.
Worth flagging where these numbers don't line up neatly: the IRS received 13,315,355 Form 1040-ES filings in fiscal 2025 (Table 1-2), up 10.3% on the year, while assessing 15.7 million estimated tax penalties. Those are different counts over different populations, one being estimated tax forms filed and the other penalties across the whole individual and estate and trust income tax base, so the ratio isn't a penalty rate. What both point at is a population that keeps growing. The BLS counted 9,662,000 unincorporated self-employed workers in August 2026 (Table A-9).
What to do before Tuesday
- Find your total tax on line 24 of your 2025 Form 1040. That's your safe-harbor total for 2026. Multiply it by 1.1 if your 2025 AGI cleared $150,000.
- Take three quarters of that number. It's what you should have paid in by September 15.
- Subtract everything already credited to 2026, including withholding from a W-2 job or a spouse's. Withholding counts as paid evenly across the year no matter when it happened, which is why raising a W-2 withholding in the autumn can still repair a spring quarter.
- Send the difference by September 15 at IRS Direct Pay. Keep the confirmation number.
- Check your state separately. State estimated deadlines and penalty rates are their own system.
And if you're on a marketplace health plan, remember that the subsidy reconciliation lands on the same return as all of this. The repayment cap is gone for 2026, so an underestimated income figure and an underpaid quarter can arrive together.
None of this covers the failure-to-pay penalty, which is a separate charge that starts if you still owe when the return is due. The underpayment interest discussed here is only about the timing of what you prepay.
Sources
- 2026 Form 1040-ES, Estimated Tax for Individuals, IRS
- Interest rates remain the same for the fourth quarter of 2026 (IR-2026-98), IRS, 21 August 2026
- Instructions for Form 2210, IRS
- Quarterly interest rates, IRS
- Estimated taxes, IRS
- Internal Revenue Service Data Book, 2025 (Pub 55-B), Tables 1-2 and 4-2
- The Employment Situation, August 2026, Table A-9, Bureau of Labor Statistics
- Top high-yield savings rates, 10 September 2026, Fortune
This is not financial advice.
