September 15 marks the year's third estimated tax deadline, and many founders are not ready. Even people who handled April 15 carefully may scramble in mid-September after a strong summer or without a repeatable way to calculate what they owe.
Two IRS-approved approaches can help avoid an underpayment penalty. They may produce different amounts, and the cheaper choice depends on whether this year's income is above or below last year's.
Two Safe Harbor Methods
You can avoid the underpayment penalty if your total estimated payments reach one of two thresholds by year-end.
The prior-year safe harbor means paying 100% of your previous year's federal tax, or 110% when prior-year adjusted gross income exceeded $150,000. Divide last year's total tax by four and pay that amount each quarter, without estimating current income.
The current-year 90% method requires paying at least 90% of your actual current-year tax by January 15 of the following year, divided across four quarterly dates. It takes more estimating, but can lower payments after an income drop.
At filing, you meet the safe harbor by reaching the smaller threshold. During the year, choose one approach and follow it, knowing you may overpay or owe more in April.
Prior-Year Safe Harbor
If you filed a federal return last year, find the total tax on line 24 of Form 1040. The prior-year safe harbor is then simple to calculate.
Example: Your 2025 total tax was $14,400, and prior-year AGI was under $150,000. Pay $14,400 in four installments, or $3,600 each quarter. Paying that amount by every deadline avoids an underpayment penalty, even if this year's income changes.
When prior-year AGI exceeded $150,000, use 110% of the prior-year tax. For $14,400: $14,400 x 1.10 = $15,840, or $3,960 each quarter.
This approach is predictable and easy to automate, but may substantially overpay when this year's income falls. The excess comes back as a refund, though you have lent the difference to the IRS interest-free.
Estimating 90% of Current Tax
This method estimates your full-year liability from income so far. Near September 15, the estimate is easier because actual profit and loss data covers most of the year.
Use these steps to estimate Q3:
- Get net profit through August 31 from your books or bank records.
- Divide by elapsed months, 8, then multiply by 12 to project the year, assuming income stays roughly steady through December.
- Estimate federal tax on projected income, including self-employment tax, net profit x 0.9235 x 0.153, and marginal-rate income tax, less above-the-line deductions.
- Multiply estimated annual tax by 90%.
- Subtract Q1 and Q2 payments. The balance is the most due across Q3 and Q4 under this method.
Your September 15 Q3 payment should cover the cumulative obligation through Q3. Equal installments mean 75% of the 90% target, or three of four payments. Uneven income may call for annualization instead.
Annualized Income Installments
Freelancers, project consultants, and seasonal businesses may earn most revenue in particular quarters. If revenue is concentrated in Q1 and Q3, equal payments can be too high in Q2 and too low in Q3.
The annualized income installment method appears on IRS Form 2210, Schedule AI. It bases each payment on income earned through that period, projected to a full year. It can reduce penalties for founders with uneven income, but requires accurate books throughout the year instead of a September reconstruction.
For each period, annualize cumulative income, calculate tax on that projection, and divide by the applicable fraction to find what should have been paid. Form 2210 instructions provide the IRS annualization factors. Tax software usually handles this when given quarterly income.
This method is not for everyone. With steady income, the prior-year safe harbor is simpler and usually similar. Annualization becomes useful when the highest and lowest quarters differ by at least 40% to 50%.
Choosing the Lower Q3 Payment
Here is a practical September comparison.
Compare: (1) your prior-year safe harbor payment per quarter, and (2) the current-year Q3 estimate from actual year-to-date income.
When income is much higher than last year, the current-year 90% method calls for more. The prior-year safe harbor is acceptable if you reach its 100% or 110% threshold, though more may be due in April.
When income is below last year's level, the current-year 90% estimate may be smaller. It can prevent the quarterly overpayment required by the prior-year approach.
The prior-year safe harbor generally suits steady year-over-year income. The current-year 90% method fits income that is rising or falling sharply.
What to Pay by September 15
Quarterly deadlines use cumulative thresholds, not separate quarter obligations. September 15 covers income from June 1 through August 31, and missing Q2 can be corrected by Q3. At filing, the IRS checks whether payments by each deadline met the required cumulative amount.
If June 15 was missed, add that installment to the September 15 payment. A small penalty applies for the June to September underpayment period at a modest interest rate. Repeated missed payments are riskier, leaving a large April balance plus penalties.
Uprise compares the prior-year safe harbor with the current-year estimate after you connect bookkeeping data. Before September 15, it provides a payment amount based on year-to-date profit, so you have a number to pay rather than a range to interpret.
This article covers general estimated tax methods under current federal law. Your payment depends on deductions, credits, other income, and filing status. A CPA can confirm the amount and help choose between methods when the results are close.