Quarterly estimated taxes for funded traders

Updated October 26, 2026 · For the 2026 tax year

No tax is withheld from prop firm payouts, but the IRS still expects to be paid as the year goes. You can do that with quarterly estimated payments, or by having your day job withhold more. Pay too little or too late and you can owe a penalty, even if you pay everything by April.

Do you have to pay estimated tax?

Generally yes, if you expect to owe $1,000 or more when you file, after your withholding. Most funded traders with a few payouts a year pass that line quickly: a single $5,000 payout can carry about $1,700 of tax.

2026 due dates

You don't have to make the January payment if you file your 2026 return by February 1, 2027 and pay the full balance with it.

How much: the safe harbor

You avoid the underpayment penalty if what you pay during the year (estimated payments plus withholding) reaches the smaller of:

• 90% of your 2026 tax, or
• 100% of your 2025 tax (the total tax on last year's return). If your 2025 adjusted gross income was over $150,000 ($75,000 if married filing separately), it's 110%.

The prior-year option is the predictable one: you know the number now, no matter how big this year's payouts get. Split it into four equal payments. Any extra tax from a great year is then due in April, without a penalty.

Payouts don't arrive evenly, so a quarter-by-quarter look matters too. If your first payout lands in August, the earlier quarters can look underpaid; IRS Form 2210 has an annualized method for uneven income. A CPA can run it.

The W-4 shortcut

If you have a day job, you can skip estimated payments and ask your employer to withhold more instead (a new Form W-4, extra amount per paycheck). Withholding counts as paid evenly through the year, no matter when it happened. So raising it in October still covers April and June. Estimated payments only count from the day you make them.

How to pay

Pay online through IRS Direct Pay, your IRS Online Account, or EFTPS, and choose "estimated tax" (Form 1040-ES) for 2026. Keep the confirmation; you'll enter the total on your return. Most states with an income tax have their own estimated payments too.

Get your number

The PayoutTax calculator shows what to set aside, the safe-harbor minimum, what's due on the next date, and the extra W-4 amount per paycheck that would cover it instead.

Sources

• IRS, 2026 Form 1040-ES: who must pay, due dates, the January exception, 90% / 100% / 110% and the $150,000 threshold
• IRS, Estimated taxes: the $1,000 rule, paying more through withholding, the penalty even with a refund
• IRS, Instructions for Form 2210: withholding treated as paid evenly, the annualized income method

Estimates and general information, not tax advice. Confirm with a CPA before you act.