September 15 carries two obligations that land on the same day and catch business owners from opposite directions. It is the due date for third-quarter estimated tax payments, and it is the extended filing deadline for partnerships and S corporations that filed for an extension back in March. Miss the first and you accrue penalties quietly. Miss the second and the penalty arrives per partner, per month, whether or not the entity owes a dollar of tax.
The estimated tax problem has gotten worse in recent years, not better. More people earn income the withholding system was never designed to capture — contract work, platform earnings, equity compensation, rental income, investment gains, and distributions from pass-through entities. If your income shifted during 2026, whether upward from a strong year or through a one-time event, the payments you calculated in April may no longer protect you.
The Law Office of Pietro Canestrelli, A.P.C. advises individuals and businesses on tax compliance and controversy from offices in Temecula and San Diego, serving clients throughout California and nationwide. This article explains who must pay estimated tax, how the safe harbors work, what happens when you fall short, and what the September pass-through deadline actually requires. If you are behind or facing a penalty, schedule a consultation with our tax attorneys.
Who Has to Make Estimated Payments
The federal tax system is pay-as-you-go. Employees satisfy that through withholding. Everyone else satisfies it through quarterly estimated payments under Section 6654 for individuals and Section 6655 for corporations.
You generally owe estimated payments if you expect to owe at least $1,000 in tax after subtracting withholding and refundable credits. In practice, that captures:
- Self-employed individuals and independent contractors
- Partners and S corporation shareholders receiving distributive income
- Landlords and real estate investors
- Retirees with substantial investment or pension income not fully withheld upon
- Anyone with a significant capital gain, option exercise, Roth conversion, or business sale during the year
- Employees whose withholding no longer matches a changed tax picture
The 2026 payment schedule runs April 15, June 15, September 15, and January 15, 2027 for the final installment. The periods are not evenly spaced, which surprises people every year — the third installment covers June through August, a three-month window, while the second covers only two.
The Safe Harbors — Your Actual Protection
You do not need to predict your tax liability perfectly. You need to land inside a safe harbor. Pay at least the smaller of:
- 90 percent of your current year total tax, or
- 100 percent of your prior year total tax — increased to 110 percent if your prior year adjusted gross income exceeded $150,000 ($75,000 if married filing separately)
The prior-year safe harbor is the more useful of the two because it is a known number. You can calculate it in January and pay it in four equal installments without forecasting anything. Even if your income doubles, paying 110 percent of last year’s tax protects you from the underpayment penalty — you will owe the balance at filing, but not the penalty.
Two practical points that get missed. First, withholding is treated as paid evenly throughout the year regardless of when it actually occurred. That means increasing withholding late in the year can retroactively cure earlier underpayments in a way that a large September or January estimated payment cannot. If you have any W-2 income, or a spouse who does, adjusting withholding is often the cleanest fix available in the fall.
Second, the annualized income installment method under Section 6654(d)(2) exists for taxpayers with genuinely uneven income. If you earned most of your income in the fourth quarter, this method lets you match payments to when income was actually earned rather than paying in equal quarters. It requires Form 2210 Schedule AI and real recordkeeping, but for seasonal businesses and taxpayers with a single large event, it can eliminate a penalty entirely.
What the Underpayment Penalty Actually Is
It is not a flat fine. It is calculated as interest on each underpayment, running from the installment due date until the earlier of the payment date or the return due date, at the federal short-term rate plus three percentage points, adjusted quarterly and compounded daily.
Because it accrues per installment, a payment made now stops the meter on future accrual but does not undo what has already run. That is the argument for paying as soon as you identify a shortfall rather than waiting to sort it out at filing.
Waiver is available in limited circumstances — casualty, disaster, other unusual circumstances where imposing the penalty would be inequitable, and for taxpayers who retired after age 62 or became disabled during the year, where the underpayment was due to reasonable cause and not willful neglect. These are requested on Form 2210 with a supporting statement.
The Pass-Through Filing Deadline
September 15, 2026 is also the extended due date for calendar-year partnerships filing Form 1065 and S corporations filing Form 1120-S. Both entity types had an original March 16 deadline this year and a six-month extension available.
The late filing penalty is structured differently than most people assume. It is assessed per partner or shareholder, per month or part of a month, for up to twelve months — and it applies even when the entity owes no tax, because these are information returns reporting income taxed at the owner level. A four-partner partnership filing three months late faces a penalty measured in thousands of dollars for a return that reports zero entity-level liability.
C corporations on a calendar year have a different extended deadline of October 15. Trusts and estates filing Form 1041 face a September 30 extended deadline. Nonprofits filing Form 990 face November 16 this year. If you operate multiple entities, the deadlines do not align, and calendaring them separately matters. Our pages on S corporation taxation and limited liability companies cover the entity-level obligations in more depth.
The Owner-Level Trap
Here is the sequence that produces the most damage. A partnership extends its return in March. The partners, lacking final K-1s, guess at their income and make estimated payments based on the prior year. The entity files on September 15 and the K-1s show substantially higher income than anyone projected. The partners now owe a large balance, and because their April, June, and September installments were all calculated on the low estimate, underpayment penalties have been running since April.
The fix is upstream. Partnerships and S corporations that will not file until September should provide owners with a good-faith income projection early enough to inform their quarterly payments — ideally by the June installment. This is a communication problem more than a tax problem, and it is entirely preventable.
Owners in states with a pass-through entity elective tax face an added layer, since entity-level state payments often carry their own prepayment deadlines that do not track the federal calendar.
If You Cannot Pay
Filing and paying are separate obligations, and the penalties differ dramatically. Failure to file runs at 5 percent per month up to 25 percent. Failure to pay runs at 0.5 percent per month, also capped at 25 percent. Filing on time without payment is roughly ten times less expensive than not filing at all.
If the balance exceeds what you can pay, options exist — installment agreements, and in appropriate cases an offer in compromise or a hardship determination. What does not work is silence. An unaddressed balance moves through the notice sequence toward enforced collection, and by the time a lien or levy is on the table your options have narrowed considerably. Our page on managing tax debt and securing relief covers the resolution paths.
Frequently Asked Questions
What happens if I miss the September 15 estimated tax payment?
The underpayment penalty accrues as interest on the shortfall from the installment due date forward, at the federal short-term rate plus three points, compounded daily. Paying as soon as possible stops further accrual on that installment. If you have wage income, increasing withholding may cure earlier shortfalls because withholding is treated as paid evenly across the year.
How much do I need to pay to avoid the penalty?
The lesser of 90 percent of your current year tax or 100 percent of your prior year tax — 110 percent if your prior year adjusted gross income exceeded $150,000. The prior-year figure is usually the safer target because it is a fixed, known amount.
Can I skip quarters and pay everything in January?
No. The penalty is computed per installment period, so a single late payment does not cure earlier missed installments. The exception is withholding, which is deemed paid ratably throughout the year regardless of timing.
What is the penalty for filing a partnership return late?
It is assessed per partner, per month or part of a month, for up to twelve months, and applies even when the partnership owes no tax. S corporations face a comparable per-shareholder penalty. Because these are information returns, having zero liability does not protect you.
Does the annualized income method help me?
It can, if your income was genuinely uneven across the year — a seasonal business, a fourth-quarter business sale, or a late-year capital gain. Filing Form 2210 with Schedule AI matches your required payments to when income was actually earned instead of assuming equal quarters.
Can the underpayment penalty be waived?
In limited circumstances — casualty or disaster, other unusual circumstances where the penalty would be inequitable, or for taxpayers who retired after age 62 or became disabled during the year where the shortfall was due to reasonable cause. Waiver is requested on Form 2210 with a supporting explanation.
Your Next Step
Estimated tax problems compound quietly. A shortfall in April is still accruing in September, and the taxpayers who address it in the fall pay meaningfully less than those who discover it at filing. If your 2026 income diverged from what you projected, this is the quarter to recalculate.
Pietro Canestrelli holds an LL.M. in Taxation and advises individuals, partnerships, and closely held businesses on compliance, penalty abatement, and IRS controversy. The firm serves Southern California and clients nationwide. Contact The Law Office of Pietro Canestrelli to review your estimated payments and entity filing obligations before the deadline. Learn more about our work as income tax counsel and our business formation and planning services.
