If you missed or underpaid an estimated tax payment, pay as soon as you can. The IRS underpayment penalty depends on three things: how much you were short, how long it stayed unpaid and the quarterly underpayment rate, which is 7% for the fourth quarter of 2026 (IRS). Paying sooner shrinks it. One missed quarter is not a reason to skip the next one, and you do not have to wait for a notice.
How the underpayment penalty works
The penalty applies when you pay too little estimated tax during the year or pay it late, and it can apply even if you are owed a refund when you file (IRS). It is figured separately for each installment due date and runs for the number of days that installment stays unpaid, according to the Form 2210 instructions. The rate is the federal short-term rate plus 3 percentage points and is reset every quarter, so check the current quarter's rate at irs.gov.
| Payment due (tax year 2026) | Covers income from |
|---|---|
| April 15, 2026 | January 1 to March 31 |
| June 15, 2026 | April 1 to May 31 |
| September 15, 2026 | June 1 to August 31 |
| January 15, 2027 | September 1 to December 31 |
Sources: IRS underpayment penalty page and 2026 Form 1040-ES. A due date on a weekend or legal holiday moves to the next business day.
Who does the math? According to the 2025 Form 2210 instructions, if you do not check box B, C or D in Part II, the IRS figures any penalty and sends you a bill. If you check one of them, you figure the penalty yourself and attach Form 2210 to your return.
Check first whether you owe a penalty at all
The IRS says you can avoid the penalty if you owe less than $1,000 on your return, or if you paid at least 90% of this year's tax or 100% of last year's, whichever is less. For 2026 the 100% becomes 110% if your 2025 adjusted gross income was more than $150,000 ($75,000 if married filing separately) (2026 Form 1040-ES). The self-employment tax guide walks through these tests.
The tests set your yearly target, but each installment is measured on its own. A payment that arrives late can still carry a penalty for the days it was late, even if you finish the year caught up. The Form 1040-ES also warns that if a payment for an earlier period is less than one-fourth of your amended estimated tax, you may owe a penalty when you file.
Worked example with made-up numbers
Say you owed $2,500 for the September 15, 2026 payment and paid it on December 15, 2026. That is 91 days late. To show the scale, assume a flat 7% for the whole period:
$2,500 x 7% x 91 / 365 = about $43.63.
This is a simplification, because Form 2210 applies each quarter's actual rate to your actual numbers, and the IRS also charges interest on penalties until the balance is paid. It still shows how the cost works: it grows with the size of the shortfall and the days it stays open, so the fastest way to limit it is to pay sooner.
How to catch up, step by step
- Work out where you stand. Use the Form 1040-ES worksheet with your net profit so far this year. Result: an estimate of the year's tax and what is still unpaid.
- Pay the missed amount now. IRS Direct Pay takes money straight from a checking or savings account at no cost, and you can also pay through your IRS online account or EFTPS. Card payments carry a fee. Result: the penalty stops growing on that amount. The Form 2210 instructions add that payments apply first to the earliest unpaid underpayment, even if you label them for a later installment.
- Size the next payment properly. The next one for tax year 2026 is due January 15, 2027. You can skip it if you file your 2026 return by February 1, 2027 and pay the whole balance with it.
- Raise withholding if you also have a job. The IRS says you can ask your employer to withhold more tax from your earnings by filing a new Form W-4, and withholding counts toward the yearly tests above.
- Use the annualized method if your income is uneven. For a seasonal business, Schedule AI inside Form 2210 may lower or eliminate one or more required installments. If you use it for any due date, you must use it for all of them.
- Keep proof and set up next year. Save every payment confirmation. Next year, divide the target (the smaller of 90% of this year's tax or 100% of last year's) into four, and move that money into a separate savings account next to your business bank account.
If you cannot pay the whole amount
The IRS says to file on time even if you cannot pay in full, and to pay as much as you can. The failure-to-pay penalty is 0.5% of the unpaid tax for each month or part of a month, capped at 25%, and it drops to 0.25% a month during an approved payment plan if you filed on time. Interest keeps accruing until the balance is paid (IRS failure-to-pay penalty page).
| Plan | Who can apply online | Setup fee |
|---|---|---|
| Short-term, 180 days or less | You owe less than $100,000 in combined tax, penalties and interest | $0 |
| Long-term, monthly payments | You owe $50,000 or less and have filed all required returns | $29 with direct debit, $69 without (reduced or waived for low-income filers) |
You apply through an IRS online account, which needs a photo ID, and approval is immediate once you finish. Penalties and interest continue until the balance is paid, and a plan that goes into default can bring a reinstatement fee. The fees above are from IRS pages reviewed in August and September 2026.
Penalty relief: what exists and what does not
| Penalty | Relief available |
|---|---|
| Underpayment of estimated tax (Form 2210) | Removal or reduction for a casualty, disaster or other unusual circumstance, or if you retired after age 62 or became disabled and had reasonable cause. The annualized method can lower it. The IRS says it generally cannot be waived for reasonable cause |
| Failure to file and failure to pay | Reasonable cause, decided case by case; lack of funds alone does not qualify. First-time abatement or its replacement, described below |
To ask for a waiver of the underpayment penalty, check box A or B in Part II of Form 2210, attach a statement explaining why you could not meet the requirement and for which period, and attach documents such as a retirement date or insurance and police reports.
First-time abatement is the relief people ask for most, but the IRS lists it for failure-to-file, failure-to-pay and failure-to-deposit penalties. The estimated tax penalty is not on that list, so do not count on it for Form 2210. It can matter for a balance you could not pay when you filed. The IRS also says an Automatic Exemption from Penalty is replacing first-time abatement. It is applied when your return is processed, needs no application and requires three prior years of timely compliance. For original returns due on or after January 1, 2027, which includes your 2026 return, first-time abatement will no longer be available (IRS). Some earlier returns are in a transition period in which you call the number on your notice and ask. Read the IRS page for the full conditions.
The rules and rates here come from IRS pages reviewed on October 31, 2026. They change, so confirm them at irs.gov, and consider a tax professional if you owe a large amount or have missed several quarters.
Frequently asked questions
What happens if I miss an estimated tax payment?
You may owe an underpayment penalty, figured on the shortfall for each day it stays unpaid at the IRS's quarterly rate. It can apply even if you are owed a refund when you file, so pay as soon as you can.
How do I know if I owe the underpayment penalty?
The IRS says you can avoid it if you owe less than $1,000 or pay at least 90% of this year's tax or 100% of last year's. If you do not check box B, C or D on Form 2210, the IRS figures any penalty and bills you.
Can first-time abatement remove the estimated tax penalty?
The IRS lists first-time abatement for failure-to-file, failure-to-pay and failure-to-deposit penalties, not the estimated tax penalty. Waivers of the underpayment penalty are limited to cases such as casualty, disaster, unusual circumstances, or retirement after 62 or disability.
Can I set up a payment plan for what I owe?
Yes. Individuals can apply online through an IRS online account: short-term plans cover up to 180 days with no setup fee, and long-term plans are available if you owe $50,000 or less and have filed all required returns.
Do I still need to make my next estimated payment?
Yes. Missing one quarter does not excuse the next. For tax year 2026 the last payment is due January 15, 2027, unless you file by February 1, 2027 and pay the full balance with your return.
Sources: IRS: Underpayment of estimated tax by individuals penalty · IRS: Instructions for Form 2210 (2025) · IRS: 2026 Form 1040-ES, Estimated Tax for Individuals · IRS: Estimated taxes · IRS: Interest rates remain the same for the fourth quarter of 2026 · IRS: Failure to pay penalty · IRS: Online payment agreement application · IRS: Payment plans; installment agreements · IRS: Penalty relief due to First Time Abate or other administrative waiver · IRS: Penalty relief for reasonable cause · IRS: Automatic Exemption from Penalty, what taxpayers should know · IRS: Eligible taxpayers may receive automatic penalty relief
