Estimated Tax Payment Due January 15, 2027: How Much to Pay to Avoid the Penalty

If you are self-employed, earn money on the side, sold investments at a gain this year or take IRA withdrawals without tax withheld, the IRS expects tax during the year, not only in April. The last 2026 estimated tax payment is due on January 15, 2027.

Miss it or pay too little, and the IRS can add an underpayment penalty even if you pay everything you owe when you file. This guide covers who needs to make the January payment, how much is enough to avoid the penalty, and two year end moves that can fix a shortfall from earlier in the year.

The rules here come from IRS Publication 505 (2026), Tax Withholding and Estimated Tax, and the Form 1040-ES instructions.

Who has to pay estimated tax

You generally need to make estimated payments if you expect to owe $1,000 or more when you file, after subtracting your withholding and refundable credits. The usual reasons:

• Self-employment or freelance income, where no one withholds tax
• Interest, dividends and capital gains, especially a large sale late in the year
• Rental income
• Retirement account withdrawals or pensions with little or no withholding
• Alimony from a divorce finalized before 2019, prizes or other income without withholding

Many people with W-2 jobs never deal with this, because their employer’s withholding covers it. The problem shows up when a side business grows, when a bonus is under withheld, or when a big capital gain lands in the fall.

The 2026 due dates

For 2026 income, the four payments were due April 15, June 15 and September 15, 2026, and the last one is due January 15, 2027.

The periods are not equal in length. The fourth payment covers income from September 1 through December 31. If a due date falls on a weekend or legal holiday, a payment made on the next business day is on time.

You can skip the January payment if you file your 2026 return by January 31, 2027 and pay the full balance with it. Few people are ready to file that early, since W-2s and 1099s often arrive in late January, but it is an option for someone with simple finances.

How much is enough: the safe harbors

You avoid the underpayment penalty if your withholding plus timely estimated payments are at least the smaller of:

1. 90% of your 2026 tax, or 2. 100% of your 2025 tax, as shown on your 2025 return

The second test is the easy one, because you already know the number. It is the total tax on your 2025 Form 1040.

There is one change for higher earners. If your 2025 adjusted gross income was more than $150,000, or more than $75,000 if you are married filing separately for 2026, the prior year test is 110% of your 2025 tax instead of 100%.

Here is how this works for two people:

• A freelance designer had total 2025 tax of $12,000 and AGI of $85,000. To be safe for 2026, she needs $12,000 in total, which is $3,000 a payment. If she paid $3,000 in April, June and September, her January payment is $3,000, even if her 2026 income ends up much higher.
• A consultant had 2025 tax of $40,000 and AGI of $210,000. His safe amount is 110% of $40,000, or $44,000, which is $11,000 a payment.

Each payment is tested on its own date. Paying the whole year’s amount in January does not erase a penalty for the April, June and September periods. It only stops the penalty from growing further.

Farmers and fishermen

If at least two thirds of your gross income for 2025 or 2026 comes from farming or fishing, the rules are simpler. You have one due date for 2026: January 15, 2027. The safe harbor is 66 2/3% of your 2026 tax instead of 90%. And if you file your 2026 return by March 1, 2027 and pay everything owed, you do not need to make an estimated payment at all.

Two ways to fix an earlier shortfall

If you skipped or underpaid earlier in the year, the January payment alone cannot cover the earlier periods. These two options can.

Increase your withholding before December 31. This is the most useful rule in the whole system. Tax withheld from wages is treated as paid evenly through the year, a quarter in each period, unless you choose to use the actual dates it was withheld. So if you or a spouse has a job, asking the employer to withhold a large extra amount from the December paychecks counts as if it had been paid in April, June, September and January.

To do it, give your employer a new Form W-4 with an extra amount on line 4(c). Our guide on checking your W-4 withholding before year end walks through the form. You can also ask for withholding on an IRA or pension distribution taken before December 31, which counts the same way.

Use the annualized income method. If most of your income arrived late in the year, the regular method assumes you earned it evenly and penalizes you for not paying earlier. The annualized income installment method on Form 2210, Schedule AI, figures each payment based on income through the end of each period. A person who sold stock at a large gain in November would owe the extra tax mainly in the January installment, not in April. You must file Form 2210 with your return to use it.

How to pay

The IRS takes estimated payments several ways:

• IRS Direct Pay from a bank account, with no fee
• Your IRS Online Account, which also shows the payments you have already made for the year
• EFTPS, the Treasury’s payment system, which requires enrollment in advance
• Debit or credit card, through approved processors that charge a fee
• Check or money order with a Form 1040-ES voucher

Whichever you choose, mark the payment as a 2026 estimated tax payment. A payment applied to the wrong year is a common cause of penalty notices.

What the penalty costs

The underpayment penalty works like interest. It is figured separately for each period, from the due date until the date you paid, at the IRS underpayment rate. That rate is reset every quarter as the federal short term rate plus 3 percentage points.

Because it is interest, the cost depends on how much was short and for how long. A shortfall of a few hundred dollars for a few months is small. A shortfall of tens of thousands of dollars from April onward is not. Our tax underpayment penalty calculator gives an estimate for your numbers.

The IRS can waive the penalty in some cases, such as a casualty or disaster, or if you retired at 62 or older or became disabled during 2026 or 2025 and the underpayment was due to reasonable cause.

Things that change your 2026 estimate

Several items new for 2026 can lower the tax you need to cover. Workers who receive tips or overtime may qualify for new deductions, explained in our guides to no tax on tips and no tax on overtime.

Other moves in the last weeks of the year can raise it. A Roth conversion before December 31 or harvesting capital gains adds 2026 income. If you do either, figure the added tax and include it in the January payment or extra withholding.

If you work for yourself, our self-employment tax calculator shows the 15.3% Social Security and Medicare tax that has to be covered on top of income tax.

A short checklist for January 15

• Find the total tax on your 2025 return and check your 2025 AGI against $150,000
• Add up the estimated payments and withholding you have so far for 2026
• Pay the difference up to your safe harbor by January 15, 2027
• If you fell short earlier in the year, raise December withholding instead of only paying in January
• If most of your income came late in the year, plan to use Schedule AI on Form 2210

This article explains federal estimated tax rules for 2026 as published by the IRS. It does not cover state estimated tax, which has its own due dates in most states, and it is not tax advice for your situation.