For federal tax, how much to set aside for quarterly estimated taxes is 25 to 30 percent of profit as a sole proprietor or partner, and 20 to 25 percent of pass-through profit if an S corporation pays you a salary, plus your state. The number that avoids penalties is different: pay at least 100 percent of last year's total tax in four equal installments, or 110 percent if your adjusted gross income was over $150,000. The 2026 due dates are April 15, June 15, September 15 and January 15, 2027. With several companies, one personal bill is funded by several businesses; decide who pays what before the first date.
Who pays estimates, and on what
Estimated tax is the income tax and self-employment tax you pay during the year on income that has no withholding attached to it: profit from a sole proprietorship, a partner's share of a partnership, an S corporation shareholder's share of its profit, rent, interest. The IRS expects it from any individual who will owe $1,000 or more after withholding and credits, and from any corporation that will owe $500 or more.
A pass-through entity is a business that pays no income tax itself and instead passes its profit to its owners' personal returns: a sole proprietorship, a partnership, an LLC taxed as either, or an S corporation. The K-1 each of them sends you in the spring is the profit you owe tax on, whether or not the cash ever left the company.
The IRS FAQ on estimated tax says partners are "personally responsible for paying any taxes due, including estimated taxes" on their share. The same goes for S corporation shareholders. The S corporation itself pays estimates only in narrow cases, built-in gains, excess passive income or a credit recapture of $500 or more, which almost never touch a 30-person operating company. So the bill is yours, personally, and the companies are where the money is. Nothing in the books of any one company tells you what the bill is.
The safe harbor, precisely
The safe harbor is the amount of estimated tax that keeps you out of the underpayment penalty regardless of what you end up owing. You are safe if your four installments add up to at least 90 percent of this year's tax, or 100 percent of last year's, whichever is smaller. If your adjusted gross income last year was over $150,000, the prior-year figure is 110 percent.
The penalty is interest that runs from each missed due date. The rate was 7 percent for the first quarter of 2026, according to the IRS figure the Beancount guide from March 2026 cites, and Revenue Ruling 2026-5 set it at 6 percent for the quarter beginning April 1, 2026. On a $13,000 installment paid three months late that is a little under $200. It is not ruinous. It is also entirely avoidable, because the prior-year number is known in January.
We would plan on the safe harbor and treat the percentage method as a check. The 110 percent figure comes off last year's return and does not move. The 90 percent figure is a guess until December. The catch is that a good year against a mediocre prior year leaves a balance due on April 15, 2027, which is not a penalty but is a cash event, and it needs to be in the forecast like any other.
Two ways to get the number
Self-employment tax is Social Security and Medicare for people who have no employer paying half. It is 15.3 percent on 92.35 percent of net earnings from self-employment. For 2026 the Social Security portion stops at the $184,500 wage base and the Medicare portion continues, with an extra 0.9 percent above $200,000, per the Tax Adviser's October 2025 summary of the Social Security Administration figures. A sole proprietor or an active partner pays it on their share. An S corporation owner does not pay it on distributions, because the corporation already withheld Social Security and Medicare on the salary, which is why the set-aside percentage for an S corp owner is lower.
The CPA's cover letter lists $214,000 of combined pass-through profit for one owner across three companies: $131,000 from an S corporation that already pays her a $96,000 salary, $58,000 as her half of a consulting LLC taxed as a partnership, and $25,000 from a rental LLC. Her salary has withholding. The rest does not.
| Method | Calculation | Annual | Per quarter |
|---|---|---|---|
| Percentage | 27% of the $58,000 partnership share (income tax plus self-employment tax) | $15,660 | |
| 22% of the $156,000 from the S corp and the rental | $34,320 | ||
| Total | $49,980 | $12,495 | |
| Safe harbor | Last year's total tax $61,400, AGI over $150,000, so 110% | $67,540 | |
| Less expected withholding on the $96,000 salary | ($14,900) | ||
| Estimates required | $52,640 | $13,160 |
The two methods land within $700 a quarter of each other, which is usual when a business is growing slowly. Pay the larger. If they had landed far apart, the percentage method is telling you this year looks nothing like last year, and the safe-harbor number is protecting you from a penalty while leaving a large bill for next April. Both numbers are federal only.
Most guides say to set aside a percentage of every payment that comes in. That works for a freelancer with no payroll. For a company with 30 people on it, revenue and profit are different animals, and putting 25 percent of receipts in a tax account would starve the operating account by March; set aside a percentage of the month's profit instead, after the bookkeeper closes it.
Where the money sits
Separate account, funded monthly, not scraped together the week before. A Bluevine survey of 774 owners in October 2025 found 40.4 percent would tap their reserves for an upcoming tax deadline, and 39 percent were holding less than a month of operating expenses. A quarterly bill paid from a reserve that thin is how the June payment turns into a line-of-credit draw.
The harder question is which company's account. Our answer is the company that earned it. Each entity opens a savings account in its own name, moves its share of the set-aside there when the month closes, and distributes it to you in the month the installment is due. The reserve then shows on that company's balance sheet, its lender can see it, and it appears in that company's monthly cash forecast as a dated outflow rather than a surprise. Some owners prefer one personal tax account fed by monthly distributions from each company. That also works, as long as the distributions get booked. What you should not do is leave the money in the operating account and remember it is there. On a 13-week cash forecast the tax payment is one of the four or five lumps that decide the low week.
Several companies, one bill
The simple allocation is that each entity distributes tax on its own K-1 share. In the example above, the consulting LLC funds $15,660, and the S corporation and the rental fund the $34,320 between them in proportion to their profit, less what the salary withholding already covers.
The complication is the year one of them loses money. Say the rental LLC posts a $19,000 loss because of a roof. The loss reduces your personal bill, which is good, but the rental has no cash to contribute and the other two companies now cover a bill that is smaller than the sum of their shares. Recompute the total from the safe harbor, split it between the two profitable companies in proportion to their profit, and have the rental distribute nothing. If instead the S corporation simply writes the whole check, the amount above its share is either an extra distribution to you, which changes your basis and your draw pattern, or a loan from the S corporation to the rental, which needs an intercompany entry in both files. Either is fine. Undocumented is not.
State estimates and the pass-through entity election
Most states with an income tax want their own quarterly estimates, on their own vouchers, and several now let a partnership or S corporation elect to pay the state tax at the entity level so the deduction lands on the business return rather than being capped on yours. Whether that election helps depends on your state, your other income and how the company's cash is split among the owners. We would not offer a rule here. Ask your CPA, before June 15, 2026, which entities should elect and what that does to each company's monthly set-aside.
What the books need to show
Every tax distribution should be coded to an equity account, owner distributions or draws, and never to an expense. Coding it to expense understates profit on the P&L, understates the next set-aside, and confuses a lender reading the statements. The P&L cannot tell you the bill. It does not know your spouse's W-2, your other companies, your deductions or what last year's return said. It can tell you the profit the bill is computed on, per company, which is the input the percentage method needs each month.
On the cash side, Navigator's Pro plan carries the tax set-aside as a dated outflow per entity in the 13-week cash plan, so the June 15 and September 15 installments are visible in April; the base plan shows cash by account for every connected company, including the tax account, in the morning brief. Plans are on the pricing page. The money you owe the state for sales tax and the IRS for payroll deposits is a separate and less forgiving pile, covered in the cash in your account that isn't yours. What this method cannot do is tell you how much to pay yourself so that the tax bill is affordable in the first place; how much to pay yourself from the business is that question.
Questions owners ask
How much should I set aside for quarterly estimated taxes?
For federal tax, 25 to 30 percent of profit if you are a sole proprietor or active partner, because that share carries self-employment tax as well as income tax. Use 20 to 25 percent of pass-through profit if an S corporation already pays you a salary with withholding. Add your state's rate on top. Then check the result against the safe harbor and pay the larger of the two.
What is the 110 percent safe harbor rule?
If your adjusted gross income last year was over $150,000, you avoid the underpayment penalty by paying 110 percent of last year's total tax in four equal installments during this year, whatever this year turns out to be. Below $150,000 the figure is 100 percent. Paying 90 percent of the current year's tax also works, but you will not know that number until December.
When are estimated taxes due in 2026?
April 15, June 15 and September 15, 2026, and January 15, 2027 for the fourth quarter. The quarters are not equal in length, so the June installment arrives only two months after April. Put all four in the cash forecast as dated outflows in January, when last year's return gives you the safe-harbor amount, so none of them competes with a payroll.
Do S corp owners pay quarterly estimated taxes?
Usually yes, on the profit that passes through to them above their salary. The salary has withholding, so the estimate covers the rest, at roughly 20 to 25 percent federal. The S corporation itself pays entity-level estimates only in unusual cases, such as built-in gains tax, that rarely apply to an ordinary operating business. Some owners raise salary withholding late in the year instead; ask your CPA whether that fits.
Which of my businesses should pay my estimated taxes?
Each company should fund the tax on its own share of your profit, from a separate savings account in its own name, distributed to you in the month the installment is due and coded to equity. A company with a loss contributes nothing that year. If one company pays more than its share, book the excess as a distribution or as an intercompany loan so the books of both companies still make sense.
Related
If the money for the June installment is the question, how much cash reserve a business should have sizes the buffer per company, and the 13-week cash flow forecast puts the installment on the week it lands. The distribution that funds it is one of three ways money reaches you from a pass-through, and owner draw vs salary vs distribution explains what each one does to your cash and to the coverage ratio your lender runs.
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Published . Last updated . Reviewed by a CFO on the Navigator team.