Two Tax Deadlines, Four Weeks Apart, and Interest Running at 7%

Extension season ends with two deadlines four weeks apart, and they are connected in a way that catches people every year.

Tuesday, September 15, 2026 is the due date for:

• Third-quarter estimated tax payments for individuals
• Extended calendar-year partnership returns (Form 1065)
• Extended calendar-year S corporation returns (Form 1120-S)
• Third-quarter corporate estimated tax payments

Thursday, October 15, 2026 is the due date for:

• Extended individual returns (Form 1040)
• Extended calendar-year C corporation returns (Form 1120)
• The final FBAR deadline for those on automatic extension

The connection that creates the crunch

Look at those two lists again. Your partnership and S corporation returns are due September 15. Your personal return is due October 15. The K-1 from the first one is an input to the second one.

If your pass-through return is filed on the afternoon of September 15, whoever prepares your 1040 has thirty days, and they have that same thirty days for every other client in the same position. That is why October is the most congested month in a tax practice, and why the plan to get to it after the 15th reliably turns into a rushed return.

The fix is unglamorous: move the pass-through work up. A partnership return finished in late August gives the individual return six comfortable weeks instead of four tight ones. It also gives you time to catch the things that get missed under pressure, such as basis limitations, at-risk calculations, passive activity groupings, or a missed depreciation election.

Interest is holding at 7%

The IRS announced on August 21 that interest rates are unchanged for the quarter beginning October 1, 2026. For individuals, that means 7% per year, compounded daily, on both underpayments and overpayments.

For corporations: 7% on underpayments, 6% on overpayments, 4.5% on the portion of a corporate overpayment exceeding $10,000, and 9% on large corporate underpayments.

Two things are worth understanding about that 7%.

Your extension did not extend the payment deadline. If you extended your 2025 return in April and underpaid what you owed, interest has been accruing since April 15 and continues until you pay. Filing the return on October 15 does not stop the clock. Paying does. If you are going to owe, paying down the balance now costs less than paying it in six weeks.

Estimated tax penalties are interest-based and not deductible. The underpayment penalty on a missed quarterly payment is effectively 7% annualized on the shortfall. It is not a flat fee you can shrug off, and it is not something you get back at filing.

Getting the Q3 estimate right

The safe harbors are the practical starting point. You generally avoid an underpayment penalty if you pay in, through withholding and estimates combined, at least:

• 90% of your current-year tax, or
• 100% of your prior-year tax, or 110% if your prior-year adjusted gross income exceeded $150,000 ($75,000 if married filing separately)

Prior-year safe harbor is the low-effort option and it is the right call for most people with steady income. But it is the wrong call in two situations worth flagging.

If your income dropped, paying 100% or 110% of last year’s tax means overpaying and waiting until next spring for the refund. Recalculating on current-year figures frees up cash now.

If your income is lumpy, the safe harbor may not protect you the way you expect. Estimated tax is assessed quarter by quarter. A real estate investor who closed a large sale in July, a business owner who collected a long-overdue receivable in August, an employee who took a Q3 bonus: each has income concentrated in one period, and paying four equal installments can still produce a penalty for the earlier quarters.

The annualized income installment method exists for exactly this. It lets you match payments to when income was actually earned rather than assuming it arrived evenly across the year. It takes more work than dividing last year’s tax by four, and for anyone with a genuinely uneven year it usually pays for itself.

A short list for the next two weeks

• Estimate your 2026 tax with eight months of real data. Not January’s projection. Actual year-to-date figures, plus what you know about Q4.
• Check what has already been paid in. W-2 withholding, prior estimates, any overpayment applied forward from 2025.
• Decide your safe harbor before you write the check, not after.
• If a pass-through return is still open, ask where it stands today. Not on September 14.
• If you are on extension for your 1040 and expect to owe, pay now. Every week costs 7% annualized.
• Do not wait for October 15 to file a finished return. The IRS made the same point on August 18: extension filers do not have to wait until the deadline. A return that is ready should go.

The bottom line

Neither of these deadlines is complicated on its own. The difficulty is that they are four weeks apart, they feed each other, and 7% interest is running the whole time on anything unpaid.

Two weeks of lead time is worth more here than almost anything else you can do.

If either deadline is looking tight

Or if you are not confident your Q3 estimate is the right number, Holloway Financial Group can help. The fastest way to start is our new client application. A few minutes of information is enough for us to tell you what needs to happen and by when.

Start your new client application

This is general information, not advice for your situation. Safe harbor calculations, the annualized method, and your specific deadlines depend on facts we would need to review. Sources: IRS IR-2026-98 (Aug. 21, 2026); IRS IR-2026-101 (Aug. 26, 2026); IRS Tax Tip 2026-63 (Aug. 18, 2026); IRS Publication 509; 2026 Form 1040-ES.