US Taxes

LLC estimated tax safe harbor in year one

Who pays estimated tax for an LLC, the 2026 due dates, the 90% and 100% safe harbor, the no-tax-last-year exception, and what differs for C corporations.

By save biz teamPublished

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Key takeaways

  • Who pays depends on how the LLC is taxed. Owners of a disregarded entity or a partnership pay through Form 1040-ES. S corporation shareholders do too, and the corporation itself generally pays only when certain corporate-level taxes reach $500. An LLC that elected C corporation status pays corporate estimated tax when it expects to owe $500 or more.
  • An individual must pay estimated tax for 2026 if two things are true. First, they expect to owe at least $1,000 after withholding and refundable credits. Second, those amounts will be less than the smaller of 90% of 2026 tax or 100% of 2025 tax. The 100% becomes 110% if 2025 adjusted gross income was more than $150,000, or $75,000 for someone married filing separately in 2026.
  • No estimated tax is due for 2026 if you were a US citizen or resident alien for all of 2025 and had no tax liability for the full 12-month 2025 tax year.
  • Estimated tax covers self-employment tax as well as income tax.
  • A corporation has no "no tax last year" exception. If the prior year showed no tax, the prior-year method is unavailable. The corporation pays on the current year's figure, or annualizes. The penalty does not apply when the return shows tax under $500.

Who pays: the LLC or you?

How the LLC is taxedWho makes the paymentsFormTrigger
Disregarded entity (one owner, no corporate election)The ownerForm 1040-ES, or Form 1040-ES (NR) for a nonresident alien ownerExpects to owe $1,000 or more
Partnership (two or more owners, no corporate election)Each partner, on their shareForm 1040-ESExpects to owe $1,000 or more
S corporation (Form 2553)Shareholders, on their share. Wages paid to a shareholder-employee are withheld through payroll. The corporation itself generally pays only if the built-in gains tax, excess net passive income tax, and investment credit recapture tax total $500 or moreForm 1040-ES for shareholders$1,000 for the shareholder, $500 for the corporation
C corporation (Form 8832)The LLC itselfCorporate estimated tax under section 6655 and the Form 1120 instructionsExpects to owe $500 or more

IRS Publication 3402 sets out those four classifications. The IRS estimated taxes page then states the trigger: "Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed." It also says corporations generally must do so "if they expect to owe tax of $500 or more." The partnership's own return has an earlier date, and the Form 1065 late-filing penalty is charged per partner, per month.

Clients who pay you as a contractor generally withhold nothing, which is why this system exists. Whether they send you a form is a separate question: the 1099-NEC threshold decides whether a client files a form, not what you owe.

The four dates for individuals

For 2026, Form 1040-ES lists the installments below. You can also pay all of it by April 15, 2026.

InstallmentDue
1stApril 15, 2026
2ndJune 15, 2026
3rdSeptember 15, 2026
4thJanuary 15, 2027

All four dates fall on weekdays, so the Saturday, Sunday, and legal holiday rule in Publication 505 does not move any of them. You can skip the January 15, 2027 payment if you file your 2026 return by February 1, 2027 (January 31 is a Sunday) and pay the balance with it.

If you started mid-year. Form 1040-ES addresses this directly. Suppose after March 31, 2026 you have a large change in income that requires you to start making estimated tax payments. Then figure the payments using the annualized income installment method in chapter 2 of Publication 505, and attach Form 2210, including Schedule AI, to your 2026 return even if no penalty is owed. The Form 2210 instructions add that the penalty is figured separately for each installment date. Paying enough later does not erase an earlier shortfall. The annualized method is the tool Form 1040-ES points an owner to when the business income starts after the first payment period.

How much: the safe harbor

Form 1040-ES for 2026 states the general rule. You must pay estimated tax if both apply:

  1. You expect to owe at least $1,000 for 2026 after subtracting withholding and refundable credits.
  2. You expect withholding and refundable credits to be less than the smaller of 90% of the tax on your 2026 return, or 100% of the tax on your 2025 return. The 2025 return must cover all 12 months.

If your 2025 adjusted gross income was more than $150,000, or $75,000 if your 2026 filing status is married filing separately, substitute 110% for 100%. Note the two years: the income test looks at 2025, the filing status test at 2026.

The amount you must pay in to avoid a penalty is that smaller figure, which Publication 505 calls the required annual payment. Suppose you expect $12,000 of 2026 tax, including self-employment tax, and your 2025 return showed $4,000 of tax for a full 12-month year with adjusted gross income under the $150,000 line. The required annual payment is the smaller of $10,800 (90% of $12,000) or $4,000 (100% of $4,000), so $4,000, or $1,000 per installment. The remaining $8,000 is still due with the return by April 15, 2027; the safe harbor avoids the underpayment penalty, not the tax.

Self-employment tax is included. Publication 505 says estimated tax "is used to pay both income tax and self-employment tax." Line 9 of the Form 1040-ES worksheet is self-employment tax. The form tells you to use 92.35% of net profit when estimating it.

The no-tax-last-year exception. Form 1040-ES says you do not have to pay estimated tax for 2026 if two things are true. First, you were a US citizen or resident alien for all of 2025. Second, you had no tax liability for the full 12-month 2025 tax year. "No tax liability" means your total tax was zero or you did not have to file. A founder who had a job in 2025 and paid tax on those wages does not meet this exception. For them, the prior-year figure is 100% of the 2025 tax, or 110% if 2025 adjusted gross income was over $150,000. The required payment is still the smaller of that figure and 90% of 2026 tax. The question is whether 2026 withholding covers it.

What counts as 2026 income depends on your accounting method. A December invoice paid in January lands in different years under the two methods; see cash vs accrual accounting and what changes on your first return.

If the LLC elected to be taxed as a C corporation

Section 6655 requires four installments, due on the 15th day of the 4th, 6th, 9th, and 12th months of the tax year. For a calendar-year company, those dates are April 15, June 15, September 15, and December 15. The Form 1120 instructions say the corporation must pay if it expects its total tax for the year, less credits, to be $500 or more.

The corporate safe harbor is 100% of the current year's tax or 100% of the prior year's tax. Section 6655(d)(1)(B) then removes the prior-year option if the preceding year "was not a taxable year of 12 months, or the corporation did not file a return for such preceding taxable year showing a liability for tax." A first-year C corporation therefore cannot use last year's tax. It pays on the current year's figure, or uses the annualized income installment method (Form 2220, Schedule A, Part II). It can also use the adjusted seasonal installment method on the same schedule. A large corporation, one with taxable income of $1,000,000 or more in any of the three preceding years, can use the prior year only for its first installment. Section 6655(f) adds that no penalty applies if the tax shown on the return is less than $500.

Form 1120-W, which used to carry the corporate worksheet, is now historical; the IRS says the 2022 edition was the last. Use the Form 1120 instructions, Publication 542, section 6655, and Form 2220 instead.

If the LLC is becoming a corporation under state law rather than only by election, the filings and tax treatment of converting an LLC to a C corp are covered separately.

If you live outside the United States

A nonresident alien owner uses Form 1040-ES (NR). If you have wages subject to US income tax withholding, the four dates are the same as above. If you do not, the form says you can pay all of your estimated tax by June 15, 2026. Or you can pay in three installments: one half by June 15, 2026, one quarter by September 15, 2026, and one quarter by January 15, 2027. The January payment can be skipped if you file Form 1040-NR by February 1, 2027 and pay the balance.

The no-tax-last-year exception is written for someone who was a US citizen or resident alien for all of 2025. A person who was a nonresident alien in 2025 does not meet that first condition.

A single-member LLC wholly owned by a foreign person stays disregarded for income tax. Treasury Regulation 301.7701-2(c)(2)(vi) treats it as a corporation for the reporting rules of section 6038A. Other parts of the same regulation treat it as a corporation for employment taxes and certain excise taxes. This article does not cover those taxes. For section 6038A it files a pro forma Form 1120 with Form 5472 attached, completing only the name, address, and items B and E on the first page. In the sources we read, that pro forma return carries no tax computation; income tax follows the owner, as Publication 3402 says for a disregarded entity. Whether the owner owes US income tax, and therefore estimated tax, depends on the owner's own US tax position, which this article does not cover.

California, as one example of the state layer

Federal estimated tax is one layer. States can add their own, and California shows how different the numbers can be. The 2026 Form 540-ES instructions require estimated payments if you expect to owe at least $500. The installments are weighted: 30% by April 15, 40% by June 15, nothing in September, and 30% by January 15, 2027. The 110% rule applies if 2025 California adjusted gross income was more than $150,000. A taxpayer with 2026 California adjusted gross income of $1,000,000 or more must base payments on 2026 tax. Each of those three amounts is halved for married or registered domestic partner filing separately.

California also charges every LLC doing business or organized there an $800 annual tax, paid with California Franchise Tax Board Form 3522. The FTB says the first-year payment is due by the 15th day of the 4th month from the date you file with the Secretary of State. Later payments are due on the 15th day of the 4th month of the taxable year. The first-year exemption applied only to tax years beginning on or after January 1, 2021 and before January 1, 2024, so an LLC formed in 2026 pays in its first year. State charges like this sit alongside the formation fees compared in Wyoming vs Delaware LLC state costs. Other states publish their own estimated tax rules; check your state's revenue department before relying on the federal dates.

FAQ

Does my LLC itself pay estimated tax? Only if it elected to be taxed as a C corporation, or, for an S corporation, when the corporate-level taxes listed in the Form 1120-S instructions total $500 or more. Otherwise the owners pay on their own returns through Form 1040-ES.

I formed the LLC in August 2026. Do I owe the April and June installments? Not necessarily. Form 1040-ES handles a large change in income after March 31, 2026 with the annualized income installment method. It tells you to attach Form 2210, including Schedule AI, to your return, even if no penalty is owed. The penalty is figured installment by installment, so the method matters.

I had no tax last year. Do I have to pay anything in advance? Not for 2026, if all three hold. First, you were a US citizen or resident alien for all of 2025. Second, your 2025 tax year covered 12 months. Third, your 2025 total tax was zero, or you did not have to file.

Is the January 15, 2027 payment required? Not if you file your 2026 return by February 1, 2027 and pay the full balance with it.

Sources

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