Tax Projection Check-In: Whether You Pay Estimates or Rely on Withholding
The third quarter is a natural checkpoint to see whether your 2026 tax projection still holds — regardless of whether you make quarterly estimated payments or have taxes withheld from a paycheck.
Whatever method you use to pay taxes throughout the year — quarterly estimated payments or withholding from a paycheck or pension — the number behind it was set months ago, built on a projection of what 2026 would look like before most of the year had actually happened. By the third quarter, that projection has had two full quarters to prove itself right or wrong.
September 15 is the quarterly deadline for anyone who makes estimated payments, but the checkpoint itself matters just as much if you don't. A W-4 adjustment to your withholdings made now still has time to correct course before year-end; a payment made back in April doesn't.
We build tax projections with clients throughout the year rather than only during filing season, and Q3 is typically when we see the biggest gap between the original projection and where things actually stand — a bonus that came in higher than expected, a business distribution, the sale of an asset earlier in the year, or simply a raise that pushed income higher than planned.
Why This Matters Whether You Pay Estimates or Rely on Withholding
If your income has moved in either direction — a new job, a liquidity event, a bonus, a change in business income — your original tax projection may no longer reflect what you'll actually owe. That's true whether the shortfall shows up as an underpaid estimated payment or as withholding that hasn't kept pace with a raise or bonus. Underpaying can trigger a penalty; overpaying simply ties up cash you could be using elsewhere until you file your tax return.
The Safe Harbor Rules Apply to Withholding Too
Generally, you avoid an underpayment penalty if your total withholding and estimated payments, combined, equal at least 90% of your current-year tax liability, or 100% of last year's liability (110% if your prior-year adjusted gross income exceeded $150,000). The key word is combined — withholding and estimated payments are added together and measured against the same target. If you rely entirely on withholding and had an income jump this year, it's worth checking that your withholding alone is actually keeping pace, rather than assuming a regular paycheck automatically satisfies the safe harbor rule.
The One Advantage Withholding Has Over Estimated Payments
Here's a distinction worth knowing: withholding is treated by the IRS as paid evenly across the year, no matter when it actually happens. Estimated payments, by contrast, are credited only to the quarter in which they're paid. That means if you're behind for the year, increasing withholding now — through a W-4 change, or a one-time withholding election on a bonus or an IRA distribution — can retroactively cover earlier quarters and avoid a penalty in a way a catch-up estimated payment cannot. It's one of the more useful, underused levers available to anyone who's fallen behind.
Realized Gains and Losses Belong in This Conversation Too
If you've harvested losses earlier in the year, or realized gains from rebalancing or a concentrated stock sale, both affect your actual 2026 tax liability — and both should factor into your tax projection, regardless of whether you true it up through an estimated payment or through withholding. This is one of the reasons we prefer to review your tax picture as a whole, rather than as a standalone estimated payment calculation.
How to Actually Act on This
If you make estimated payments, the September 15 installment is your next opportunity to true up — payments can be made through IRS Direct Pay, EFTPS, or a mailed check with Form 1040-ES. If you rely on withholding, the adjustment happens through a new Form W-4 with your employer, or a one-time withholding election on a bonus, RSU vesting event, or retirement account distribution. Either path works; what matters is checking the number against where your year has actually landed.
The Windward Approach
Because our team prepares tax projections as part of ongoing planning, not just at filing season, this isn't a number dusted off from April — it's checked against where your year has actually landed, whichever way you pay it. If your income picture has shifted since spring, it's worth confirming you're still on track before Q4 narrows your options.
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