Three-Number Check for Your Fourth Estimated Payment at a 7% Rate

The fourth payment is a cash decision

A bootstrapped founder reads the bank balance daily, and the fourth estimated payment is where a cash leak starts if the number is too low. Profit is not cash. A quarter can look healthy on the income statement and still leave you short when the payment date arrives.

The IRS announced that its interest rates would not change for the calendar quarter beginning October 1, 2026. For individual taxpayers, the underpayment and overpayment rate for that quarter is 7% per year, compounded daily. In other words, a small gap does not sit still. It accrues every day until the tax is paid.

The three-number check sizes the fourth payment before the interest accrues

The worksheet is three lines, and each line is testable in a minute if your numbers are in front of you. It forces you to compare what you have already put in, what you expect to owe, and the amount that stops the interest.

1. Total estimated payments made before the fourth payment: add the first three payments and any withholding you count toward the safe harbor.
2. Projected current-year tax: use the best number you can defend, not the last year's number if your revenue moved.

Line 1 exists because safe harbor is a running total. If you paid too little early, the fourth payment has to absorb the gap. Line 2 exists because last year's tax can be a mismatch when your revenue changes, even if the growth is deliberate and slower. Line 3 exists because the payment is a difference, not a guess.

Say your first three payments total $7,000, your prior-year tax was $8,000, and your projected current-year tax is $10,000. If you pay less, the gap is known, and the interest begins to accrue on it.

The projected number is where founders get sloppy. They use last year's tax because it is already in the file. That works when the business is flat. It fails when a big client, a delayed invoice, or a one-time sale changes the current year. A bootstrapped founder may choose slower growth, but the tax calculation still has to reflect the year you are actually in.

For an S corporation shareholder, a pass-through business owner, the timing can be worse. The shareholder income can show up after the payment date, while the tax obligation is already part of the year. The fourth payment is the place to decide whether that gap becomes interest.

If the fourth payment is bigger than the bank can absorb, do not split the difference. A smaller payment may keep the balance comfortable, but it leaves a known gap. That gap is a fixed amount, not a rounding error. It will accrue interest until the return is filed and the tax is paid. The worksheet shows the gap before you choose it.

The rate is the price of being short

For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. The rates for the quarter beginning October 1, 2026 were computed from the federal short-term rate determined during July 2026. Revenue Ruling 2026-15, the IRS's published rate announcement, sets the interest rates for tax underpayments and overpayments for that quarter. The ruling will be published in Internal Revenue Bulletin 2026-36, the IRS's public bulletin, dated August 31, 2026.

The underpayment rate is a running charge, not a one-time fee. It is the cost of carrying an unpaid tax balance through the quarter. When you set the fourth payment, you are deciding whether to pay the tax now or to pay the tax plus the daily cost of waiting. For a founder who treats the bank balance as the company's real P&L, the second option adds interest to the balance.