The simplest way to avoid a 2026 federal estimated-tax underpayment penalty is to pay, through withholding and timely estimated payments, at least the smaller of 90% of your expected 2026 tax or 100% of your 2025 tax from a return covering 12 months. If your 2025 adjusted gross income was above $150,000 ($75,000 if married filing separately), the prior-year safe harbor is generally 110% instead of 100%. If the tax you expect to owe after withholding and credits is less than $1,000, the general estimated-payment requirement usually does not apply.
These are federal individual rules for tax year 2026. State estimated-tax systems have different thresholds, percentages and due dates. A 2025 return filed during 2026 uses the 2025 Form 2210 procedures, not the rules for a 2026 return. The current-year planning figures and worksheets are in IRS Publication 505 (2026); use the publication and Form 1040-ES instructions for the dates that apply to your situation.
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How do I avoid an underpayment penalty?
Start with the IRS safe-harbor test, then make sure the required amount arrives by each installment due date. The annual target alone is not enough: the IRS can assess a penalty for an individual installment that was short or late, even when later payments or a refund make your total year-end balance look adequate.
For most individuals planning for 2026, compare these amounts:
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- 90% of your expected 2026 tax
- 100% of the total tax shown on your 2025 return, if that return covered a full 12 months
Your required annual payment is generally the smaller amount. Higher-income taxpayers generally substitute 110% of 2025 tax for the 100% figure when 2025 adjusted gross income exceeded $150,000, or $75,000 for married filing separately. The comparison is made before subtracting expected 2026 withholding.
The IRS general test also has a $1,000 trigger. Estimated payments are generally required only when you expect to owe at least $1,000 after withholding and tax credits and your withholding and credits are below the applicable safe-harbor amount. Do not subtract estimated payments when deciding whether the $1,000 trigger applies; estimated payments are the amounts you are deciding whether to make.
This test is prospective. A refund shown on last year’s return does not automatically mean you are protected this year, and a large projected refund does not replace a review of your current income and withholding. Conversely, someone with a large tax bill may avoid the penalty by meeting a safe harbor even if the final return still requires an additional payment.
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What is the 90% or 100% estimated-tax rule?
The 90% current-year test
The current-year route requires payments equal to at least 90% of your final 2026 tax, as estimated using your income, deductions, credits and the tax rules that apply to 2026. It can produce the lowest required amount when your 2026 income will be lower than in 2025, but it requires a reasonable forecast and later revisions when your circumstances change.
Include all major income categories in the forecast: wages, bonuses, net earnings from self-employment, interest, dividends, rents, gains, pensions and taxable retirement distributions. Also account for deductions, credits, additional Medicare or net investment income taxes when applicable, and any tax already paid through withholding. A low estimate based only on salary can fail after a brokerage distribution or business profit is added.
The 100% prior-year test
The prior-year route uses 100% of the total tax on your 2025 return, provided that return covered 12 months. It is often easier to establish because the amount is known, rather than forecast. It may require more cash than the 90% current-year amount when your income falls, and it may not be available when you had no prior-year tax liability or did not file a full-year return.
Use the total-tax figure called for by the applicable worksheet and return instructions, not simply the amount you paid when filing. A payment due with the return, a refund, or a balance carried forward is not by itself the safe-harbor amount.
The 110% rule for many higher-income taxpayers
When 2025 adjusted gross income was above $150,000, the prior-year percentage generally rises to 110%. For married taxpayers filing separately, the threshold is $75,000. This higher percentage applies to the prior-year method; it does not change the general 90% current-year percentage.
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Check the filing status and AGI used for the prior-year threshold. If your status changes during 2026, review the applicable instructions rather than assuming the percentage from a prior calculation still applies.
The farming and fishing percentage
If at least two-thirds of your gross income in 2025 or 2026 is from farming or fishing, the current-year safe-harbor percentage is generally 66⅔% rather than 90%. The higher-income 110% substitution does not apply under this farming-or-fishing rule. Because eligibility and timing are specialized, use the applicable year’s Publication 505 and Form 1040-ES instructions.
How much estimated tax should I pay?
Use this sequence for a 2026 plan. It is a planning framework, not a calculation of your personal liability; that requires your return details.
- Estimate full-year 2026 tax. Project wages, self-employment income, interest, dividends, rent, gains, deductions, credits and other income. Use the 2026 Estimated Tax Worksheet in IRS Publication 505.
- Apply the $1,000 test. Estimate the 2026 balance remaining after expected withholding and tax credits. If it is below $1,000, the general estimated-payment requirement usually does not apply.
- Calculate both safe harbors. Compare 90% of expected 2026 tax with 100% of 2025 total tax on a 12-month return. Use 110% of 2025 tax for many taxpayers above the 2025 AGI thresholds, or the 66⅔% current-year rule when the farming-or-fishing test applies.
- Choose the smaller qualifying annual amount. This is the amount that must be covered by withholding plus estimated payments.
- Subtract projected withholding. The difference is the amount you generally need to pay through Form 1040-ES installments. If withholding already covers the required annual amount, additional estimated payments may not be necessary.
- Recheck after changes. Recalculate when a job, bonus, business profit, investment gain, deduction, credit, marriage, divorce or other major circumstance changes.
For example, if your projected 90% current-year amount is lower than the applicable prior-year amount, the 90% figure may be your annual target. If the prior-year figure is lower, it can provide a more predictable target even when your 2026 income is difficult to forecast. The choice is a safe-harbor planning decision; it does not change the actual tax due on your 2026 return.
Keep a worksheet showing the income assumptions, withholding forecast, safe-harbor calculation and payment dates. Preserve payment confirmations and payroll records in case the IRS asks how you reached the figures. Reconcile the forecast with year-to-date pay stubs, brokerage statements, business books and prior returns rather than relying on a rounded guess.
Can I increase my withholding instead of making quarterly payments?
Yes. Withholding and estimated payments are interchangeable sources of credit toward the safe harbor. Increasing payroll withholding is often practical for wages, pensions and other payments that already have withholding. Submit an updated Form W-4 to your employer and use the IRS Tax Withholding Estimator to determine an additional per-paycheck amount.
On Form W-4, you can account for other income, deductions and credits and request an additional dollar amount from each paycheck. Revisit the form after a marriage, divorce, second job, change in dependents, large bonus or significant investment event. A W-4 update affects future paychecks, so submit it promptly; it cannot generally retroactively create withholding for checks already issued.
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Withholding has a timing advantage: federal income tax withheld during the year is generally treated as paid evenly throughout the year for estimated-tax purposes, even if the withholding occurs late. Estimated payments, by contrast, are credited to the installment for which they were made and can leave an earlier due date underpaid. Confirm the treatment for your circumstances in the applicable Form 2210 instructions.
Estimated payments remain necessary or useful when income has no withholding, including self-employment earnings, interest, dividends, rental income and many capital gains. You can combine an updated W-4 with Form 1040-ES payments rather than choosing only one method. A taxpayer with wages can deliberately increase withholding to cover a side business, while a person with no wage income may need to make all required payments directly.
When are estimated tax payments due?
Estimated tax is generally paid in four installments. The exact 2026 dates, and any weekend or holiday adjustment, are published in the 2026 Publication 505 and Form 1040-ES materials. Use that year’s calendar rather than relying on a date from a different tax year.
The installments matter independently. The 2025 Form 2210 instructions state: “The penalty is figured separately for each installment due date.” A payment that catches up later does not automatically erase an earlier installment underpayment. A single late payment can therefore produce a penalty for the period it was late, even when the year-end balance is paid in full.
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How to manage the calendar
- Enter every due date in a calendar when you receive your income projection.
- Schedule electronic payments early enough to allow processing time and retain the confirmation number.
- Recalculate after each installment if income or withholding changes.
- If a due date falls on a weekend or legal holiday, verify the adjusted date in the current IRS instructions.
- Do not assume that mailing a check on the due date has the same proof as an accepted electronic payment; keep the applicable submission or postmark evidence.
Form 1040-ES payment vouchers are not the only option. The IRS provides electronic payment methods, and the instructions explain how to designate the payment for the correct tax year. Carefully select 2026 when making a payment during calendar 2026; a payment accidentally applied to another year may not protect the intended installment until it is corrected.
What if my income is uneven during the year?
Equal installments can be misleading when most income arrives late, such as a large year-end bonus, a substantial capital gain or a seasonal business profit. In that situation, the annualized income installment method can align required payments with when income was actually earned.
Using Schedule AI
Schedule AI, Annualized Income Installment Method, is attached to Form 2210. It recalculates the required installment at each period using income received through that period instead of assuming a uniform annual pattern. This can reduce an earlier installment when little income existed then, while increasing a later installment after the gain or profit occurs.
- Track income, deductions and withholding through each installment period.
- Complete the annualized calculations in Schedule AI using the Form 2210 instructions for the return year.
- Compare the annualized required installments with your payments and withholding.
- File Form 2210 when the annualized method is needed to show why the standard calculation does not apply.
Annualization does not eliminate tax; it changes the timing analysis. Keep brokerage statements, invoices, payroll records and other documentation supporting when income was received. A capital gain recognized in a later period should not simply be spread equally across all earlier periods if the annualized method is otherwise appropriate.
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Not necessarily. A projected refund by itself is not the test. You generally do not need estimated payments when your expected tax remaining after withholding and credits is less than $1,000, or when your withholding and credits already meet the applicable safe harbor. A refund expectation can be wrong if income, withholding or credits change, so compare your projection with the $1,000 test and the 90%/prior-year safe harbor.
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Refundable credits can affect the balance calculation, but you should use the worksheet’s treatment for the credit rather than counting a credit that you may not qualify to receive. If your refund depends on a new or uncertain credit, update the projection when eligibility becomes clearer.
How withholding and estimated payments fit different income sources
| Income situation | Usually most practical first step | Key risk |
|---|---|---|
| Steady wages or pension | Review withholding and submit an updated Form W-4 when needed. | A bonus, second job or changed filing status can make the existing withholding forecast inaccurate. |
| Self-employment or contract income | Use Form 1040-ES and reserve cash from each payment; consider additional wage withholding if available. | Profit and deductible expenses fluctuate, so a fixed estimate can become stale. |
| Interest, dividends or rental income | Project annual income and make estimated payments for the portion without withholding. | Year-end distributions or rent changes may create a late-year shortfall. |
| Large capital gain late in the year | Recalculate and consider Schedule AI annualization. | Equal installments can overstate early requirements and understate the later one. |
| Multiple jobs or spouses with wages | Coordinate Forms W-4 and check combined withholding with the IRS estimator. | Each employer may calculate withholding without seeing the household’s other income. |
| Pension or retirement distributions | Review the payer’s withholding election or make Form 1040-ES payments. | A distribution election can change withholding quickly and may be difficult to correct after payment. |
What happens if I underpay?
The estimated-tax penalty is generally based on the amount that should have been paid for each installment and how long that amount remained unpaid. The IRS normally calculates the penalty and sends a bill when Form 2210 is not required. Interest-rate changes and the applicable return year affect the dollar amount, so do not use a penalty figure from another year as a forecast.
The penalty is separate from the tax due with the return. Paying the remaining tax by the filing deadline prevents a late-payment problem on that balance, but it does not necessarily remove an earlier estimated-tax penalty. Conversely, satisfying a safe harbor can protect against the underpayment penalty even when a balance remains payable with the return.
When Form 2210 is filed
Form 2210 may be required or useful when you claim a waiver, use the annualized income installment method, or meet another listed condition. If the form is not required, you can generally leave the penalty calculation to the IRS. If you need to explain a waiver or annualization, complete the relevant sections and retain supporting records.
Read the instructions for the return year shown on the form. The procedures for a 2025 return filed in 2026 should not be transferred automatically to a 2026 return filed later. If the IRS sends a penalty notice, compare its installment calculation with your payment confirmations and withholding records before requesting an adjustment.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Exceptions and penalty waivers
The 2025 Form 2210 instructions describe several exceptions and waiver grounds. They are fact-specific and do not automatically apply merely because payment was difficult.
- Small balance after withholding: An exception generally applies when tax after withholding is less than $1,000.
- No prior-year tax liability: Certain taxpayers with no prior-year tax liability who filed a full prior-year return can qualify under the instructions.
- Retirement or disability: A waiver may be available when qualifying retirement occurred after age 62 or a taxpayer became disabled, provided there was reasonable cause.
- Casualty, disaster or unusual circumstances: The IRS may waive a penalty when imposing it would be inequitable because of a qualifying event.
A waiver requires the applicable filing and an explanation. The IRS decides whether the facts meet the standard; do not assume approval before filing. Explain the dates, circumstances and corrective actions clearly, and attach documentation requested by the form or notice. A waiver request is not a substitute for paying the underlying tax.
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Farmers and fishers have different payment timing when they meet the IRS income test. For 2026, the IRS says a qualifying calendar-year individual may pay the full estimated tax by January 15, 2027, or file and pay the full balance by March 1, 2027. The ordinary first-three installment schedule does not apply in that situation. Confirm both eligibility and the current-year dates in the 2026 IRS instructions before using this schedule.
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The two-thirds test is based on gross income, not simply net profit, so calculate it using the applicable instructions. If your business combines farming or fishing with other activities, preserve records supporting the income percentages and ask a qualified tax professional when the classification is uncertain.
A practical review checklist
- Confirm that you are planning for a 2026 liability or handling a 2025 return filed in 2026.
- Use federal rules separately from your state’s estimated-tax rules.
- Estimate total 2026 tax and the expected balance after withholding and credits.
- Check whether the $1,000 trigger applies.
- Compare 90% of 2026 tax with the applicable 2025 percentage: 100% generally, 110% above the AGI thresholds, or the farming-and-fishing rule when eligible.
- Subtract projected withholding and divide the remaining amount among the applicable installments.
- Update Form W-4 if payroll withholding can cover a shortfall.
- Use Form 1040-ES for income without withholding.
- Consider Schedule AI when income is genuinely uneven.
- Save payment confirmations, withholding records and calculation worksheets.
- Review Form 2210 instructions if you need a waiver or annualization.
- Check the tax year selected on every electronic payment.
- Revisit the plan after a sale of investments, business change, job change, marriage, divorce, retirement or major credit change.
Bottom line for 2026
To avoid an underpayment penalty, make sure withholding and estimated payments together satisfy the correct safe harbor and arrive on time for each installment. For most people, that means comparing 90% of expected 2026 tax with 100% of 2025 tax, using 110% for many higher-income taxpayers, and first checking whether the expected balance after withholding and credits reaches $1,000. Adjust withholding or Form 1040-ES payments as facts change, and use Schedule AI or a waiver procedure only when your income pattern or circumstances support it.
Frequently Asked Questions
How do I avoid an underpayment penalty?
Meet the applicable safe harbor through withholding and estimated payments, and make the required amount by each installment due date. For most 2026 taxpayers, compare 90% of expected 2026 tax with 100% of 2025 tax, or 110% for many higher-income filers.
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Estimate your full-year 2026 tax, apply the $1,000 balance-due test, choose the smaller qualifying safe-harbor amount, and subtract expected withholding. The remainder is generally covered with Form 1040-ES installments.
Can I increase my withholding instead of making quarterly payments?
Yes. An updated Form W-4 can increase withholding from wages or pensions, and withholding generally receives favorable timing treatment. Use Form 1040-ES for income that has no withholding or combine both methods.
Do I need to pay estimated taxes if I expect a refund?
Usually not if your expected tax remaining after withholding and credits is below $1,000 or your withholding and credits meet the safe harbor. Recheck the calculation when income or credits change.
What is the 90% or 100% estimated-tax rule?
The general annual safe harbor is the smaller of 90% of current-year tax and 100% of prior-year tax from a full 12-month return. The prior-year percentage is generally 110% when prior-year AGI exceeded $150,000, or $75,000 for married filing separately.
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Consider the annualized income installment method on Form 2210 Schedule AI. It uses income received during each period and may prevent equal installments from overstating early requirements when income arrives later.
The Bottom Line
For 2026, avoid most federal estimated-tax penalties by meeting the smaller of the applicable current-year or prior-year safe harbor through timely withholding and estimated payments. Check the $1,000 test, respect each installment date, and use Schedule AI or a waiver only when the facts support it.
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