Every year, somewhere around this time, I have the same conversation with a business owner. They have had a good year. Sales are up, the bank balance looks healthy, and they are already thinking about next year. Then I ask one question: what have you paid toward this year’s taxes so far? The pause that follows tells me everything.
So here are the things I wish every business owner knew about estimated taxes before the year closes. Not to scare anyone. Just so January and April feel like a plan instead of a surprise.
1. Taxes are pay-as-you-go, not pay-in-April
A lot of owners think of taxes as one big bill in the spring. That is not how the system is designed. The IRS describes federal income tax as a pay-as-you-go tax, meaning you are expected to pay it as you earn income during the year (IRS, Publication 505). If you are an employee, withholding from your paycheck does that for you. If you own a business, nobody withholds for you, so estimated payments are how you keep up (IRS, Estimated tax FAQs).
The mindset shift matters. Once you see taxes as a running cost of your profit, like rent or payroll, you stop treating them as a once-a-year emergency.
2. January 15, 2027 is the date that matters next
For the 2026 tax year, the fourth and final estimated payment is due January 15, 2027 (IRS, 2026 Form 1040-ES). That date lands right after the holidays, right when owners are closing the year and handling payroll forms, which is exactly why it gets missed.
There is one exception worth knowing. Form 1040-ES says you do not have to make that January payment if you file your 2026 return by February 1, 2027 and pay the entire balance due with it (IRS, 2026 Form 1040-ES). For most owners whose books are still being closed in January, that is not realistic, so I plan around the January 15 date.
3. Last year’s tax can be your target
This is the part owners find most useful. You generally have to make estimated payments if you expect to owe at least $1,000 for 2026 after withholding and refundable credits (IRS, 2026 Form 1040-ES). The question is how much is enough.
Form 1040-ES explains the two common targets: 90% of the tax you will show on your 2026 return, or 100% of the tax shown on your 2025 return. If your 2025 adjusted gross income was more than $150,000 ($75,000 if married filing separately), the prior-year figure becomes 110% (IRS, 2026 Form 1040-ES).
Why do I like the prior-year number? Because it is already known. When your income is growing, your current-year tax is a moving target until the books are closed. Last year’s return is a fixed number you can plan around today.
4. A refund does not cancel a penalty
I hear this one a lot: “I’ll probably get a refund, so I’m fine.” Not necessarily. The IRS notes that you may be charged an underpayment penalty even if you are due a refund when you file (IRS, Estimated tax FAQs). Timing matters, not just the final total.
And if your income came in unevenly, for example a slow first half and a big fourth quarter, there is a method for that. The IRS explains that you may be able to annualize your income using the worksheet in Publication 505 and attach Form 2210 with Schedule AI, which shows your uneven payments matched income you received unevenly (IRS, Estimated tax FAQs). This is detail work, and it is worth having someone run it with you.
5. A separate tax account changes everything
This one is not a tax rule. It is a habit, and it is the one I push hardest. Open a separate savings account and move a set share of every deposit into it, the same day the money arrives. Then when a due date shows up, the money is already sitting there.
The percentage depends on your situation, so I do not hand out one number for everyone. But the habit itself works for almost every owner I talk to, because it stops your operating account from looking richer than it really is. Paying is the easy part: the IRS accepts estimated payments through options like IRS Direct Pay, EFTPS and your IRS Online Account (IRS, 2026 Form 1040-ES).
What I would do this month
If you are reading this in November, you still have time. Pull your 2025 return and find the total tax line. Look at what you have paid toward 2026 so far. Get your books current through October so your 2026 profit is a real number, not a guess. Then decide on a January 15 amount on purpose, instead of finding out in April what you should have done.
How PRC can help
At PRC Accounting & Taxation, we keep your books current every month, so your estimated payments are based on real numbers. We can review what you have paid for 2026, compare it with the IRS targets above and help you plan the January payment before the holidays get in the way.
Book a free 30-minute consultation, call (984) 379-7823 or email office@prcaccounting.com.
This article is general information, not tax advice for your specific situation.
Hafiz M. Riaz, FCCA
Founder & CEO, PRC Accounting & Taxation LLC
Sources
- IRS, 2026 Form 1040-ES, Estimated Tax for Individuals
- IRS, Estimated tax FAQs
- IRS, Publication 505, Tax Withholding and Estimated Tax
This article is general information, not tax or legal advice for your specific situation. Confirm dates and rules against the current IRS source before you rely on them.