The September 15 Deadline That Doesn’t Forgive Guesswork

The September 15 Deadline That Doesn’t Forgive Guesswork

 

­
There is something uniquely unpleasant about writing a large check to the IRS when you are not entirely sure whether the number is right.

­
For W-2 employees, taxes are mostly happening quietly in the background. Money comes out of each paycheck, and by the time April arrives, much of the bill has already been paid.

­
For a physician receiving 1099 income, a consultant, a business owner, or anyone else whose income does not come with enough tax withholding attached, the experience can look very different.

­
Four times a year, there is a date on the calendar.

­
And on September 15, the third estimated federal tax payment for 2026 is due.
­

­
The IRS operates on a pay-as-you-go system. For estimated tax purposes, the year is divided into four payment periods, with the third payment due September 15. If you do not pay enough during the year, an underpayment penalty may apply even if you ultimately receive a refund when you file your return.
­

That does not mean every business owner needs to know their final tax bill down to the dollar by September.

­
There are rules designed to provide some predictability.

­
Generally, an individual who expects to owe at least $1,000 after withholding and credits may need to make estimated payments. In many cases, avoiding an estimated-tax penalty means paying enough during the year to cover at least 90% of the current year’s tax or 100% of the prior year’s tax. For certain higher-income taxpayers, the prior-year threshold increases to 110%.
­

To Generally Avoid an Underpayment Penalty	Pay at Least
Based on this year’s expected tax	90% of the current year’s tax
Based on last year’s tax (most taxpayers)	100% of the prior year’s tax
Based on last year’s tax (certain higher-income taxpayers)	110% of the prior year’s tax

 

 

 

Source: Internal Revenue Service, Estimated Tax FAQs and 2026 Publication 505.

­
That is often referred to as a safe-harbor approach.

­
But there is an important difference between intentionally using a safe harbor and simply repeating last quarter’s payment because nobody has run the numbers.

­
One is a strategy.

­
The other is a guess.

­
This is especially relevant for people whose income changes throughout the year.

•  Maybe your medical practice had a stronger summer than expected.

•  Maybe a large consulting contract came through.

•  Maybe your business added employees, purchased equipment, or had expenses that were not part of the original forecast.

•  Maybe you sold an investment.

•  Maybe your spouse received a bonus.

•  Maybe interest income is materially higher than it was a few years ago.

•  Maybe you made a large charitable gift.

­
Maybe none of those things happened, but your income simply looks very different today than it did when the first estimated payment was calculated in April.

­
The calendar may divide the year into payment periods.

­
Your financial life rarely cooperates by dividing itself neatly into quarters.

­
That is why estimated taxes should ideally be connected to an actual picture of what has happened so far and what the rest of the year is expected to look like.

­
Most people think about taxes after the year is over.

­
By then, the job is largely historical.

­
Here is what you earned. Here is what you deducted. Here is what you owe.

­
Good tax planning asks a different question:
­

­
That distinction matters.

­
There are financial decisions that may affect taxable income, retirement savings, charitable giving, business cash flow, investment income, and the timing of certain expenses.

­
Not every strategy is appropriate for every person, and many require coordination among financial, tax, legal, and retirement-plan professionals.

­
But you cannot evaluate an option you did not know existed until the following April.

­
Imagine a business owner who expected to earn $300,000 this year.

­
By September, it is becoming clear that the number could be closer to $500,000.

­
That is good news.

­
It is also information.

­
If the estimated-tax strategy is still operating from assumptions made six months ago, the payments may no longer reflect the reality of the business.

­
More importantly, the change in income may create planning conversations that were not relevant at the beginning of the year.
­

•  Does the business already have the right retirement-plan structure?

•  Is there room for additional retirement savings?

•  Are there charitable goals that were already part of the family’s plan?

•  Are there business expenditures planned for later in the year?

•  Are investment gains or losses creating additional tax considerations?

­
The goal is not to manufacture deductions for the sake of avoiding taxes.

­
The goal is to see the whole picture before the year is over.
­

­
For certain profitable businesses and self-employed professionals, particularly those with consistently high income, one conversation may involve a cash balance pension plan.

­
A cash balance plan is a type of defined benefit retirement plan. Unlike a typical 401(k), the retirement benefit is determined under a formula, and an actuary is generally involved in determining required funding. The IRS notes that defined benefit plans can allow businesses to contribute and potentially deduct more than they could under defined contribution plans, although they are also more complex and costly to establish and maintain.
­
For the right business owner, that can make a significant difference.

­
It can potentially allow substantially more money to be directed toward retirement while also affecting the business’s taxable-income picture, subject to the plan design, actuarial calculations, employee demographics, deduction rules, and other requirements.

­
For the wrong business owner, it may be entirely inappropriate.

­
These plans involve real funding obligations and administrative complexity. Contributions are not simply a number the owner picks in December because a tax bill looks uncomfortable. An actuary determines funding requirements, and the business needs to evaluate whether it can support those commitments over time.
­

­
There is a common pattern among successful professionals and business owners.

­
Income comes in. Money accumulates in the business or bank account. An estimated-tax date approaches. Someone provides a number. The check gets written. Then everyone goes back to work.

­
That may satisfy the immediate deadline.

­
But the payment itself should not be the entire tax-planning process.

­
A better process connects the tax projection to the rest of the financial picture.

•  How much cash does the business need?

•  What are you saving for retirement?

•  What large expenses are coming?

•  How has investment income changed?

•  What has already been withheld or paid?

•  What does the year-end projection look like?

•  What decisions still need to be made before December 31?

­
Those questions turn estimated taxes from a quarterly interruption into part of a larger financial plan.

­
September 15 is not the end of the year.

­
That is precisely why it matters.

­
There is still time left on the calendar.

­
By now, you have eight months of real-world information about your income, expenses, business, investments, and life.

­
The year is no longer a projection made in January. But it is not finished either.

­
That makes September a valuable middle ground.

­
There may be nothing that needs to change. Your estimated payments may be perfectly appropriate. Your retirement plan may already be exactly what it should be. Your tax professional may have everything dialed in.

­
That is a perfectly good outcome.

­
But it should be the result of looking.
­

Sources

Internal Revenue Service, Third Quarter Tax Calendar, including the September 15, 2026 estimated-tax deadline for individuals.  https://www.irs.gov/businesses/small-businesses-self-employed/2026-tax-calendar

Internal Revenue Service, Estimated Tax FAQs and 2026 Publication 505, Tax Withholding and Estimated Tax.  https://www.irs.gov/publications/p505

Internal Revenue Service, Defined Benefit Plan guidance and 2026 retirement-plan limits.  https://www.irs.gov/retirement-plans/defined-benefit-plan

U.S. Department of Labor, Cash Balance Pension Plans guidance.  https://www.dol.gov/agencies/ebsa/key-topics/retirement-benefits/cash-balance-pension-plans