Q1 estimated tax payments 2026: Advisory guide for accountant-managed clients

Published Wednesday 10 June 2026

Table of contents

• What are estimated tax payments?
• Who needs to make estimated tax payments?
• When are estimated tax payments due in 2026?
• How to calculate estimated tax payments
• How to pay estimated taxes to the IRS
• What happens if clients miss an estimated tax payment?
• Simplify estimated tax tracking with Xero
• FAQs on estimated tax payments

Key takeaways

• Clients who expect to owe $1,000 or more in tax need to make estimated quarterly payments to avoid underpayment penalties.
• You can use the safe harbor method, current year method, or annualized installment method to calculate payments depending on your client's income pattern.
• The four quarterly deadlines for 2026 are April 15, June 15, September 15, and January 15, 2027.
• EFTPS is the most efficient payment option for practices managing estimated taxes across multiple clients.

What are estimated tax payments?

Your clients submit estimated amounts to the IRS based on how much they expect to earn in the year, ahead of filing their tax return. The IRS uses a pay-as-you-go tax system, so taxes are paid throughout the year as income is received. Estimated tax payments cover income tax, self-employment tax, and alternative minimum tax.

Clients who don't have enough tax withheld by an employer need to make these payments directly. This typically means self-employed clients pay through estimated tax payments calculated using Forms 1040-ES and 1040-ES(NR), so this is something you'll be supporting regularly.

Who needs to make estimated tax payments?

Any individual who expects to owe $1,000 or more in tax when their return is filed, after accounting for withholding and credits, is generally required to make estimated tax payments.

This typically applies to clients who are sole proprietors, partners, and S corporation shareholders. Common client types include freelancers, independent contractors, clients with rental income, and those earning significant investment income from dividends or capital gains. Corporations face a lower threshold and need to make estimated tax payments if they expect to owe more than $500 when returns are filed.

If your clients are employed as well as self-employed, they may be able to avoid making estimated tax payments by asking their employer to withhold more tax from their paycheck. This can simplify things for clients with a mix of W-2 and 1099 income.

The rules are slightly different for individuals with income from fishing and farming, household employers (those who hire gardeners, housekeepers, and other staff for the home), and higher-income taxpayers. See the IRS's estimated taxes guidance for more detail on these client types.

When are estimated tax payments due in 2026?

The four estimated tax payment deadlines for tax year 2026 are April 15, June 15, September 15, and January 15 of the following year.

Clients can pay everything by the Q1 estimated tax payment deadline of April 15, 2026. Or, they can split them across the four quarterly due dates:

• April 15, 2026
• June 15, 2026
• September 15, 2026
• January 15, 2027

If a deadline falls on a legal holiday or weekend, the payment is due on the next business day. Payment deadlines may also be extended in the event of a natural disaster. If your clients file their tax return by February 1, 2027, and their entire balance is paid with the return, they don't need to make the January 15 payment. This gives your clients a small amount of extra time to make the final payment.

Accurate estimates and on-time payments matter. Underpayment penalties apply even when clients are due a refund. You can help them by using their financial records to make accurate tax estimate predictions.

How to calculate estimated tax payments

There are two primary methods you can use to ensure clients' estimates are accurate and they can avoid underpayment penalties. A third option, the annualized installment method, is available for clients with irregular income throughout the year.

Safe harbor method

The safe harbor method helps your clients avoid underpayment penalties by using the previous tax year's earnings to calculate their estimated tax payments in 2026.

You start with the client's total tax for the previous year, as stated on their tax return, and split the entire amount (100%) across the four payment periods. For clients with more than $150,000 in adjusted gross income (AGI), they need to pay 110% of the previous year's total tax instead of 100%.

This is a straightforward method for calculating estimated tax payments because you can use their previous tax return to determine how much they owe. It gives clients consistency, since they know what they need to pay throughout the year and are sure to avoid underpayment penalties. However, it does mean your clients could face a large bill when they file their return if their income increases significantly compared to the previous year.

Current year method

The current year method requires you to estimate the adjusted gross income your clients will earn for the current tax year. This could include income from self-employment, dividends, and interest. Adjustments, like student loan interest, health savings account (HSA) contributions, and qualified tip income, are then deducted from this amount.

Then, using Form 1040-ES, you apply any expected deductions, taxes, and credits to the adjusted gross income before applying the current year tax rates to work out their estimated bill. Deduct any withholding amounts if your clients also pay tax through employers. The IRS provides estimated tax worksheets, complete with tax rates and individual steps for deductions and credits.

The final tax amount is then split into four quarterly estimated payments paid throughout the year. The IRS requires taxpayers to pay at least 90% of the total tax due through estimated payments if the current year method is used. If less than this is paid through the year, your clients could face an underpayment charge.

Unlike the safe harbor method, the current year method doesn't guarantee you'll pay enough to avoid underpayment penalties. You'll need accurate and reliable financial records for your clients to make a precise estimate. Tools like financial reporting software can help you pull the numbers you need quickly.

Annualized installment method

For clients with income that varies significantly throughout the year, such as seasonal businesses or those with large one-time gains, the annualized installment method may reduce estimated payments in lower-income quarters. This method uses Form 2210, Schedule AI, to calculate payments based on income actually earned in each period rather than dividing the full-year estimate equally. It requires more detailed recordkeeping but can improve cash flow for clients with uneven income patterns. Cash flow forecasting tools can help you track income timing across quarters.

How to pay estimated taxes to the IRS

Your clients have several options for submitting estimated tax payments to the IRS, as outlined in the IRS payment options guide. The best choice often depends on how many clients you're managing and how you prefer to track payments.

• IRS Direct Pay: A free option that lets clients pay directly from a checking or savings account at irs.gov/directpay. Payments are confirmed immediately.
• Electronic Federal Tax Payment System (EFTPS): This is often the best option if you're managing estimated payments for multiple clients. EFTPS allows you to schedule payments in advance, view payment history, and manage several accounts. Enrollment is required at eftps.gov.
• IRS2Go app: The IRS mobile app lets clients pay online or by phone through their smartphones.
• Credit or debit card: Clients can pay through IRS-approved payment processors. A processing fee applies.
• Check or money order: Payments can be mailed with a Form 1040-ES payment voucher. This is the slowest option and hardest to track.

For practices managing estimated payments across a client base, EFTPS is worth the enrollment effort. It gives you visibility into scheduled and completed payments without relying on clients to confirm.

What happens if clients miss an estimated tax payment?

If a client misses an estimated tax payment or underpays, the IRS charges an underpayment penalty calculated using the federal short-term interest rate plus three percentage points, compounded daily. For Q1 2026, the IRS underpayment rate is 7% per year for individuals. Interest accrues on the unpaid amount until it's paid in full.

The penalty is calculated on Form 2210 (Underpayment of Estimated Tax by Individuals, Estates, and Trusts). In some cases, the penalty can be reduced or waived if underpayment was due to a casualty, disaster, or other unusual circumstances. Clients who retired after age 62 during the tax year or the prior year may also qualify for a penalty waiver. Clients need to send a written explanation to the IRS if their underpayment falls under one of these exceptions.

The most reliable way for clients to avoid a penalty is by paying at least 90% of the tax due in the current year, or 100% of the tax due in the previous year (110% for those with AGI above $150,000). You can help them by calculating estimated tax amounts accurately using up-to-date financial records and real-time cash flow data.

Simplify estimated tax tracking with Xero

Working out what clients owe is much easier when you have access to reliable financial records, and reporting and forecasting tools. With Xero accounting software, you can make financial projections for your clients to see how their income is likely to change over the coming months.

You can also draw up reports based on live records in the software, so you always have an up-to-date picture. This helps clients avoid underpayment penalties and surfaces cash flow patterns and gaps before they become problems.

Ready to support your clients with better tools and real-time financial data? Join the partner program.

FAQs on estimated tax payments

Here are answers to frequently asked questions about managing estimated taxes for your clients.

Can estimated taxes be paid in a lump sum?

Yes. Your clients can pay all of their estimated taxes in a lump sum by April 15, the first quarterly deadline. Otherwise, tax payments need to be spread across the four quarterly due dates.

Do W-2 employees with side income need to pay estimated taxes?

Yes, estimated taxes generally need to be paid on self-employment income. However, clients who have their employers withhold enough tax from their W-2 wages may be able to cover the additional liability without making separate quarterly payments. This requires coordinating with their employer to adjust withholding.

Can you adjust estimated tax payments mid-year?

Yes. If a client's income changes significantly during the year, you can recalculate their estimated tax payments using Form 1040-ES and adjust future quarterly payments accordingly.

Can clients skip a quarterly estimated tax payment?

Skipping a quarterly payment isn't recommended, even if a client had little income during that period. The IRS calculates penalties on a per-quarter basis, so a missed payment can trigger a penalty even if the full-year total is eventually paid. If income is uneven, the annualized installment method on Form 2210 may help reduce payments in lower-income quarters.