Tax planning
Business tax planning: estimated taxes, safe harbors and the 2026 numbers
Year-round business tax planning with IRS sources: who pays estimated tax ($1,000 individuals, $500 corporations), payment dates, the 90%/100% safe harbor, annualizing uneven income and the 2026 Section 179, QBI and mileage figures.
Prepared by Aldro Accounting · Updated · Sources checked
The quick answer
Business tax planning starts with the IRS pay-as-you-go rule: tax is paid as income is earned, through withholding or estimated payments. Sole proprietors, partners and S corporation shareholders generally pay estimated tax if they expect to owe $1,000 or more, and corporations if they expect to owe $500 or more. Most avoid the underpayment penalty by paying the smaller of 90% of this year's tax or 100% of last year's tax shown on the return.
Planning starts with pay-as-you-go
The IRS says taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. If you are in business for yourself, you generally need to make estimated tax payments.
Estimated tax covers more than income tax. It also pays self-employment tax and alternative minimum tax.
Timing matters on its own. The IRS notes a penalty can apply for late estimated payments even if you are due a refund when you file. Farmers, fishermen and certain higher income taxpayers have different estimated tax rules, set out in Publication 505.
Who has to pay estimated tax
Individuals, including sole proprietors, partners and S corporation shareholders, generally make estimated payments if they expect to owe $1,000 or more when the return is filed. Corporations generally do if they expect to owe $500 or more.
No estimated tax is due for the current year if all three of these are true: no tax liability for the prior year, U.S. citizen or resident alien for the whole year, and a prior tax year that covered 12 months. No tax liability means total tax was zero or no return was required.
An owner who also earns wages can avoid estimated payments by asking the employer to withhold more, using a new Form W-4.
Figure it, then adjust it during the year
Individuals, including sole proprietors, partners and S corporation shareholders, generally figure estimated tax on Form 1040-ES. Nonresident aliens use Form 1040-ES(NR). The calculation needs expected adjusted gross income, taxable income, taxes, deductions and credits for the year.
The IRS asks for adjustments both for changes in your own situation and for recent changes in tax law. If earnings come in higher or lower than expected, completing another Form 1040-ES worksheet refigures the payment for the next quarter.
Income that arrives unevenly can be annualized. The IRS says annualizing income and making unequal payments may avoid or lower the penalty.
Payments don't have to be quarterly lump sums. The IRS allows weekly, bi-weekly or monthly payments, as long as enough is paid in by the end of each quarter.
Payment dates and how to pay
The year is split into four payment periods, each with its own due date. When a due date falls on a Saturday, Sunday or legal holiday, a payment made the next business day is on time. For a mailed payment, the U.S. postmark date is the payment date.
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| Taxpayer | Estimated payments due | Return due |
|---|---|---|
| Individuals (Form 1040) | 15th day of the 4th, 6th and 9th months of the tax year, and the 15th day of the 1st month after it ends | 15th day of the 4th month after year end (Form 4868 for a 6-month extension) |
| Corporations (Form 1120) | 15th day of the 4th, 6th, 9th and 12th months of the tax year | 15th day of the 4th month after year end (Form 7004 to extend) |
| Partnerships (Form 1065) | Not applicable | 15th day of the 3rd month after year end (Form 7004 for a 6-month extension) |
Payments can go by mail with Form 1040-ES, online, by phone, through the IRS app or through your IRS online account. Businesses can make most common payments, including estimated taxes and federal tax deposits, through the business tax account or Direct Pay for businesses. Some business payments still go through EFTPS.
Safe harbors and penalty relief
Most taxpayers avoid the underpayment penalty if they owe less than $1,000 after withholding and credits, or if they paid at least 90% of the current year's tax or 100% of the tax shown on the prior year's return, whichever is smaller.
Form 2210 checks the penalty for individuals, estates and trusts. Form 2220 does the same for corporations.
The penalty may be waived if the underpayment came from a casualty, disaster or other unusual circumstance and imposing it would be inequitable. It may also be waived for someone who retired after reaching age 62, or became disabled, in the year payments were due or the year before, if the underpayment was due to reasonable cause and not willful neglect.
Employers have a separate clock for payroll tax deposits. A late deposit draws 2% of the unpaid deposit for 1 to 5 calendar days, 5% for 6 to 15 days and 10% for more than 15 days.
2026 numbers to plan around
Several figures that shape year-end decisions are set by the IRS each year. These are the 2026 amounts from Rev. Proc. 2025-32 and the IRS mileage announcement.
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| Item | 2026 amount |
|---|---|
| Section 179 expensing limit | $2,560,000 |
| Section 179 phase-out starts at | $4,090,000 of property placed in service |
| Section 179 limit for a sport utility vehicle | $32,000 |
| QBI deduction threshold, married filing jointly | $403,500 (phase-in range $553,500) |
| QBI deduction threshold, most other filers | $201,750 (phase-in range $276,750) |
| Business standard mileage rate | 72.5 cents per mile |
Section 179 lets a business elect to expense the cost of qualifying property. The limit is reduced dollar for dollar once property placed in service during the year passes the phase-out threshold, and not below zero.
For the qualified business income deduction, P.L. 119-21 added a minimum deduction of $400 for taxpayers with at least $1,000 of qualified business income, starting with tax years beginning after December 31, 2025. The Section 179D energy efficient commercial buildings deduction ends for property whose construction begins after June 30, 2026.
A simple year-round planning routine
Each step below ties back to a rule above. Good monthly books make every one of them faster, because the estimate starts from real year-to-date income.
Aldro keeps the books each month and our team prepares and files the year's returns for one flat price that covers everything tax, with quarterly estimate reminders included.
- Start of year: use last year's return to see which safe harbor applies and set the four payments
- Each quarter: compare year-to-date income with the estimate and refigure the next payment on a new Form 1040-ES worksheet
- Uneven income: consider annualizing so payments follow when income was earned
- Before buying equipment: check the 2026 Section 179 limit and phase-out
- Vehicle use: log business miles for the 72.5 cent rate
- Year end: confirm enough was paid in by the last payment date to meet the safe harbor
Worked example
A sole proprietor's prior-year return showed $12,000 of total tax. This year the owner expects $16,000. 90% of $16,000 is $14,400, and 100% of last year's tax is $12,000. The smaller is $12,000, so paying $3,000 in each of the four periods meets the general safe harbor (special rules apply to certain higher income taxpayers). Separately, a business that places $4,200,000 of Section 179 property in service in 2026 is $110,000 over the $4,090,000 threshold, so its expensing limit drops from $2,560,000 to $2,450,000. And 10,000 business miles at 72.5 cents comes to $7,250 under the standard mileage rate.
Common questions
Who has to make estimated tax payments?
Sole proprietors, partners, S corporation shareholders and other individuals who expect to owe $1,000 or more at filing, and corporations that expect to owe $500 or more.
What taxes do estimated payments cover?
Income tax, plus other taxes such as self-employment tax and alternative minimum tax.
How do I avoid the estimated tax penalty?
Generally by owing less than $1,000 after withholding and credits, or by paying the smaller of 90% of this year's tax or 100% of the tax shown on last year's return.
What if my business income is seasonal?
The IRS says annualizing income and making unequal payments may avoid or lower the penalty. Form 2210 is used to check it.
Can I pay estimated tax monthly?
Yes. Weekly, bi-weekly or monthly payments are fine as long as enough is paid in by the end of each quarter.
What is the Section 179 limit for 2026?
$2,560,000, reduced by the amount that Section 179 property placed in service during the year exceeds $4,090,000. The SUV limit is $32,000.
The cheapest way to get your business taxes done: $399 flat.
Business tax filing is $399 USD a year, and it covers everything tax for that year.
How it works
- Tell us about your business. A two-minute form. No payment is collected through it.
- Get your next steps by email. We’ll email you the next steps within one business day. After you sign up we’ll send you a secure upload link for your documents.
- We file it. Our team prepares and files your return. Add bookkeeping for $20 a month if you want it.
What's included
$399 a year covers everything tax for that tax year.
- Every business return for the year. All the federal and state or provincial business returns you need for the tax year: Schedule C, 1065, 1120-S, 1120 and their state returns in the US; T2, or T1 with T2125, in Canada.
- More than one state. Multi-state returns are included at the same price.
- Your personal return. The owner’s personal return (1040 or T1) is included when it’s needed for the business income.
- Quebec. Quebec returns (CO-17, TP-1 and TP-80) are included. Our Quebec pages are in French, and our team works with you in English.
- Extensions and reminders. Extensions (Form 7004 or 4868) and quarterly estimate reminders are included.
- Information returns. 1099-NEC, T4/T4A and T5018 slips are included in the tax price.
- City and excise returns. City and local business tax returns, and state excise returns such as Washington B&O, are included in the yearly price.
- Franchise tax reports. State franchise tax reports, such as the Texas franchise tax report, are included.
- Estimated tax and instalment amounts. We work out your quarterly estimated tax payments in the US, or your CRA instalments in Canada, and tell you what to pay and when.
- Unfiled past years. Each unfiled prior-year return is $399 per tax year, the same flat price.
- Bookkeeping at $20 a month. Unlimited bank and card accounts, monthly reconciliation and monthly statements.
Basic inventory tracking for online stores, such as Shopify, is included. Full cost-of-goods reconciliation is quoted separately. Payroll processing and sales-tax filing aren’t included in bookkeeping. Prices are in USD. Our team prepares and files your return.
Sources
- IRS: Estimated taxes · checked October 31, 2026
- IRS: Publication 509 (2026), Tax Calendars · checked October 31, 2026
- IRS: Failure to deposit penalty · checked October 31, 2026
- IRS: Rev. Proc. 2025-32 · checked October 31, 2026
- IRS: 2026 business standard mileage rate · checked October 31, 2026
This guide explains general rules from the sources listed. It isn’t tax advice for your situation.