Form 1040-ES: What It Means for Employers

What it means in practice

What the form is. The IRS describes estimated tax as the method used to pay tax on income that is not subject to withholding, and gives examples: earnings from self-employment (including gig economy work), interest, dividends, rents and alimony. Estimated tax covers more than income tax: the IRS Estimated taxes page says it also pays self-employment tax and alternative minimum tax. Form 1040-ES is not a return. It is a worksheet kept for the individual's records plus vouchers; the payments are credited when the individual files the annual return. This page describes the 2026 revision of Form 1040-ES and Publication 505 (2026).

Why employers meet it. Estimated tax is the individual's obligation, but it touches several employer decisions. A business generally does not withhold from payments to an independent contractor, so the contractor pays income and self-employment tax through estimated payments and the business reports the fees on Form 1099. The IRS Estimated taxes page names sole proprietors, partners and S corporation shareholders as individuals who generally must make estimated payments if they expect to owe $1,000 or more, which includes many owners of small businesses. Household employers can pay nanny or caregiver taxes this way, and employees with side income can choose between estimated payments and more withholding from their pay.

Who is covered. Form 1040-ES (2026) says the estimated tax rules apply to U.S. citizens and resident aliens; residents of the five U.S. territories it lists; and nonresident aliens, who use Form 1040-ES (NR) instead. Estates and trusts use Form 1041-ES, and Pub. 505 says estates are exempt for the first 2 years after the decedent's death. Corporations have separate rules, with a $500 threshold (IRS Estimated taxes page).

Who is excluded. Under the 2026 form, you do not have to pay estimated tax for 2026 if you were a U.S. citizen or resident alien for all of 2025, your 2025 tax year covered 12 months, and you had no tax liability for 2025, meaning your total tax was zero or you did not have to file a return. Pub. 505 also says no estimated tax is due if the expected tax minus withholding is less than $1,000, or if withholding in each payment period is at least one-fourth of the required annual payment.

Key terms. The required annual payment is the smaller of 90% of the tax expected for 2026 and 100% (or 110% for higher incomes) of the tax shown on the 2025 return; it is line 12c of the 2026 Estimated Tax Worksheet. The year is divided into four payment periods, each with its own due date. Under the regular installment method the required amount is split into four equal installments, which Pub. 505 says suits income received evenly. The annualized income installment method (Schedule AI of Form 2210) can lower early installments when income is uneven.

2026 due dates and timing. The 2026 form lists April 15, June 15 and September 15, 2026, and January 15, 2027, or payment of the whole estimate by April 15, 2026. The four periods are uneven: January 1 to March 31, April 1 to May 31, June 1 to August 31, and September 1 to December 31 (Pub. 505). The January payment is not required if the 2026 return is filed by February 1, 2027 and the full balance is paid with it; Pub. 505 (2026) gives the date as January 31, 2027, which falls on a Sunday. A due date on a weekend or legal holiday moves to the next business day. For mailed payments the postmark counts, and the 2026 form cautions that the postmark is now the date mail is processed at a USPS facility, which may be later than drop-off.

How the worksheet works. The 2026 Estimated Tax Worksheet follows these steps: (1) estimate 2026 AGI; (2) subtract the standard or itemized deductions, any qualified business income deduction and any Schedule 1-A deductions; (3) figure tax with the 2026 rate schedules; (4) subtract credits and add self-employment tax and other taxes; (5) subtract refundable credits to reach total 2026 estimated tax (line 11c); (6) find the required annual payment (line 12c); (7) subtract expected withholding (line 13). If line 12c minus line 13 is zero or less, or line 11c minus line 13 is under $1,000, no payments are required. Otherwise one-fourth of line 14a, less any 2025 overpayment applied, goes on line 15.

Self-employed people and pass-through owners. The 2026 Self-Employment Tax and Deduction Worksheet applies 92.35% to expected net profit, then 2.9% for Medicare and 12.4% for Social Security up to the 2026 maximum of $184,500, reduced by wages already subject to Social Security tax; half the result is the deduction used in expected AGI. The worksheet points to Schedule C, Schedule F and box 14, code A, of a partner's Schedule K-1 (Form 1065) for net profit. For 2026 the form also notes a minimum qualified business income deduction of $400 for taxpayers with at least $1,000 of qualified business income from an active trade or business. S corporation shareholders who are also employees receive W-2 wages with withholding, which counts on line 13.

Household employers. Publication 926 (2026) says a household employer reports Social Security, Medicare, FUTA and withheld income tax for a household worker on Schedule H, attached to the employer's own Form 1040, with the balance due by April 15, 2027. To avoid owing it all at once, the household employer can ask the employer at their own job for more withholding, ask a pension payer for more withholding, or make or increase estimated payments using Form 1040-ES. The 2026 form says to include household employment taxes in the estimate if the employer will have income tax withheld from wages, pensions or other income, or would have to make estimated payments even without those taxes. Pub. 926 lets an owner of a business or farm include these taxes in the business's employment tax deposits and returns instead.

Employees: withholding instead of vouchers. Form 1040-ES (2026) says that someone who also receives wages may be able to avoid estimated payments by filing a new Form W-4 asking the employer to withhold more. The 2026 Form W-4 offers two routes: Step 4(a) for other income that has no withholding (not including self-employment income), and Step 4(c) for a flat extra amount per pay period. Its instructions say that an employee who completes Step 4(a) likely will not have to make estimated payments for that income. The employer's role is to process the new W-4 in federal income tax withholding; it does not decide between withholding and estimated tax for the employee.

How payments are made. Form 1040-ES (2026) and Pub. 505 list the IRS Online Account, IRS Direct Pay (free transfers from a checking or savings account), debit or credit card or digital wallet through service providers that charge a fee, electronic funds withdrawal when e-filing, and check or money order with the voucher payable to "United States Treasury." An overpayment on the 2025 return can be applied to 2026; if the return was filed on time it is treated as paid April 15, 2026, and it cannot later be refunded or used another way. The IRS Estimated taxes page says payments can be made weekly, biweekly or monthly as long as enough is paid by each due date.

EFTPS change for individuals. The 2026 form still describes the Electronic Federal Tax Payment System (EFTPS) as a free option for enrolled users. The current IRS EFTPS page says individual taxpayers can no longer create new EFTPS accounts, should pay most individual taxes through their Online Account, and that current EFTPS users can still use it for now. Businesses can make estimated payments and federal tax deposits through a business tax account or Direct Pay for businesses, with some payments still requiring EFTPS (IRS Estimated taxes page).

The underpayment penalty and Form 2210. The penalty applies separately to each installment for the number of days it stays unpaid, so it can apply to an early period even if later payments catch up, and even when a refund is due (2025 Instructions for Form 2210, the edition current at review). It is figured on the underpayment, the period and the IRS quarterly underpayment rate, which the IRS lists at 7%, 6%, 7% and 7% for the four quarters of 2026. Payments apply to the earliest underpaid installment first. Withheld income tax is treated as paid one-fourth on each due date unless the taxpayer elects to use actual withholding dates. The IRS generally figures the penalty and sends a bill; Form 2210 is required in some cases, such as a waiver request or the annualized method.

Waivers. The Form 2210 instructions allow a waiver if the taxpayer retired after age 62 or became disabled in the year or the year before and had reasonable cause, or if a casualty, disaster or other unusual circumstance made the penalty inequitable. The IRS penalty page says reasonable cause alone generally does not qualify.

Worked example 1: the prior-year safe harbor. A contractor with no withholding had 2025 tax of $8,000 on AGI under $150,000 and expects 2026 tax of $12,000. Ninety percent of $12,000 is $10,800; 100% of $8,000 is $8,000. The required annual payment is the smaller, $8,000, or four installments of $2,000 under the regular method. The remaining $4,000 is still owed with the return, but the installments meet the penalty rule.

Worked example 2: higher income with wages. An S corporation owner had 2025 AGI of $200,000 and 2025 tax of $40,000, expects 2026 tax of $50,000, and expects $20,000 of withholding from salary. The 110% rule gives $44,000, which is less than 90% of $50,000 ($45,000), so line 12c is $44,000. Subtracting $20,000 of withholding leaves $24,000, or $6,000 per installment.

Worked example 3: a mid-year change. Pub. 505 gives this case: a person figures estimated tax of $1,800 and pays $450 on April 15 and June 15. After a July 10 property sale the estimate becomes $4,100. Using the amended worksheet, 75% of $4,100 is $3,075; minus $900 already paid, the September payment is $2,175 and the January payment is the remaining $1,025.

Worked example 4: a household employer. A parent pays a nanny $25,000 in cash wages in 2026, above Pub. 926's $3,000 threshold for Social Security and Medicare and its $1,000-per-quarter FUTA threshold. Social Security and Medicare at 15.3% total $3,825, of which the employee's 7.65% half can be withheld from pay. FUTA is 6% of the first $7,000; with the full 5.4% credit the net rate is 0.6%, or $42. The roughly $3,867 reported on Schedule H can be spread over the four estimated tax dates, about $967 each.

Where states differ. Form 1040-ES covers federal tax only, and states with income taxes run their own systems. For example (not a complete list), the California Franchise Tax Board estimated tax page sets a lower threshold ($500, or $250 for married/RDP filing separately), uses uneven installments for 2026 of 30%, 40%, 0% and 30% on the federal due dates, and requires taxpayers with California AGI of $1,000,000 or more to base payments on 90% of current-year tax. The New York Department of Taxation and Finance estimated tax page lists cash earners, contractors, freelancers, and seasonal and per diem workers among those who may need to pay New York estimated tax. Check your state revenue department.

Recordkeeping. The 2026 form includes a Record of Estimated Tax Payments with columns for amount due, date paid, check or confirmation number and amount paid, excluding card fees. The Online Account shows 5 years of payment history and EFTPS shows 15 months.

Q: Does a business pay estimated tax for its contractors? No. Form 1040-ES is an individual form; the contractor figures and pays their own estimated tax.

Q: Do quarterly payments have to be equal? Not always. Equal installments fit even income; the annualized income installment method can allow smaller early payments, with Schedule AI filed with Form 2210.

Q: Is an April payment needed if income starts in the summer? No. Pub. 505 says the first payment is due by the due date of the period in which income subject to estimated tax first arises; income first received in July points to September 15, 2026.

Q: Who calculates the penalty? The IRS generally figures it and sends a notice. Taxpayers file Form 2210 themselves only in the situations its instructions list.

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