Two Medicare late enrollment penalties are described the same way in almost every summary: sign up late, pay more for life. They are built on different units. The Part D drug penalty counts single months and multiplies them by a premium figure that the Centers for Medicare & Medicaid Services resets every year. The Part B medical penalty counts only completed twelve-month periods and multiplies them by a much larger premium. For 2026 the two base figures are $38.99 and $202.90. What follows is what each formula does with the same gap, and why one of them costs a different amount every January while the gap behind it does not change. What Starts the Part D Count The condition is not lateness in general. The Medicare drug coverage cost page states: “You may owe a late enrollment penalty if at any time after your Initial Enrollment Period is over, there’s a period of 63 or more days in a row when you don’t have Medicare drug coverage or other creditable prescriptio...
September 15, 2026 is a Tuesday, and it is the due date for the third of the four required installments of 2026 federal estimated tax. Two separate rules decide what happens on that date. One fixes how large the installment has to be. The other decides what accrues if it comes up short, and that second rule is written as a rate applied for a number of days rather than as a flat late charge.
Both rules sit in section 6654 of the Internal Revenue Code, and the percentages that size the installment are set by statute. The point at which the two halves of the sizing test swap places is not published anywhere, because it is a ratio between two of those percentages rather than a figure the statute states.
What the September 15 installment has to cover
Under 26 U.S.C. 6654(c) there are four required installments for each taxable year, due April 15, June 15 and September 15 of the tax year and January 15 of the year after. The IRS pairs each due date with the stretch of income it covers, and that pairing is what makes the September date the one that catches summer income (Internal Revenue Service, Estimated tax questions and answers, read September 4, 2026):
- January 1 to March 31, due April 15
- April 1 to May 31, due June 15
- June 1 to August 31, due September 15
- September 1 to December 31, due January 15 of the following year
The size of each one comes from 26 U.S.C. 6654(d)(1)(A): “Except as provided in paragraph (2), the amount of any required installment shall be 25 percent of the required annual payment.” Three of the four dates fall on or before September 15, so the cumulative requirement at that point is 75 percent of the required annual payment. April 15 carries 25 percent, June 15 brings the running total to 50 percent, and the January date completes 100 percent.
Put a number on it. If the required annual payment for 2026 works out to $44,000, each installment is $11,000, and the amount that has to be in by September 15, 2026 is $33,000.
Withholding is what makes that cumulative test easier to satisfy late in the year than it first appears. Under 26 U.S.C. 6654(g)(1), “For purposes of applying this section, the amount of the credit allowed under section 31 for the taxable year shall be deemed a payment of estimated tax, and an equal part of such amount shall be deemed paid on each due date for such taxable year, unless the taxpayer establishes the dates on which all amounts were actually withheld, in which case the amounts so withheld shall be deemed payments of estimated tax on the dates on which such amounts were actually withheld.” Federal income tax withheld from a paycheck in November is therefore treated as though one quarter of it had been paid on each of the four installment dates, including the September date that has already passed, unless the taxpayer establishes the actual withholding dates and gives up that spreading. An estimated tax payment sent by check or made electronically gets no such treatment. It counts on the day it is paid.
Where the two branches of the sizing test cross
The required annual payment is defined in 26 U.S.C. 6654(d)(1)(B) as “the lesser of—(i) 90 percent of the tax shown on the return for the taxable year (or, if no return is filed, 90 percent of the tax for such year), or (ii) 100 percent of the tax shown on the return of the individual for the preceding taxable year.” The same subparagraph then closes the prior-year route in two situations: “Clause (ii) shall not apply if the preceding taxable year was not a taxable year of 12 months or if the individual did not file a return for such preceding taxable year.”
Subparagraph (C) raises the prior-year figure for higher earners. 26 U.S.C. 6654(d)(1)(C)(i) reads: “If the adjusted gross income shown on the return of the individual for the preceding taxable year beginning in any calendar year exceeds $150,000, clause (ii) of subparagraph (B) shall be applied by substituting ‘110 percent’ for ‘100 percent’.” Clause (ii) of the same subparagraph narrows the threshold: “In the case of a married individual (within the meaning of section 7703) who files a separate return for the taxable year for which the amount of the installment is being determined, clause (i) shall be applied by substituting ‘$75,000’ for ‘$150,000’.” The separate-return status is tested on the installment year; the adjusted gross income it is applied to is still the preceding year’s.
Both figures are computed and the statute takes the smaller of the two. But they move in different ways. The current-year figure rises whenever the 2026 tax rises. The prior-year figure is frozen the moment the 2025 return is filed. So there is a level at which they change places, and it can be written as a ratio.
The crossing point, computed for this article. The prior-year figure becomes the smaller of the two once 1.10 multiplied by the 2025 tax falls below 0.90 multiplied by the 2026 tax. Dividing through, that happens when the 2026 tax exceeds the 2025 tax by a factor of 1.10 ÷ 0.90 = 1.222, a rise of more than 22.2 percent. For a filer whose 2025 AGI was $150,000 or less, the multiplier is 1.00 ÷ 0.90 = 1.111, and the switch comes at a rise of more than 11.1 percent. The statute sets the three percentages; the ratio between them is not one of them.
In dollars: a 2025 tax of $40,000, with 2025 AGI above $150,000, puts the prior-year figure at $44,000. The current-year figure is the smaller one only while the 2026 tax stays below $44,000 ÷ 0.90 = $48,889. Above that level the required annual payment stops at $44,000 however large the 2026 tax turns out to be, and the September 15 cumulative requirement stops at $33,000.
What a short installment accrues
The consequence of paying less than a required installment is set out in 26 U.S.C. 6654(a): “Except as otherwise provided in this section, in the case of any underpayment of estimated tax by an individual, there shall be added to the tax under chapter 1, the tax under chapter 2, and the tax under chapter 2A for the taxable year an amount determined by applying—(1) the underpayment rate established under section 6621, (2) to the amount of the underpayment, (3) for the period of the underpayment.”
That period is defined in 26 U.S.C. 6654(b)(2): “The period of the underpayment shall run from the due date for the installment to whichever of the following dates is the earlier—(A) the 15th day of the 4th month following the close of the taxable year, or (B) with respect to any portion of the underpayment, the date on which such portion is paid.”
Three features of that structure matter more than the label attached to it. The amount is a rate applied across a period, so it grows with elapsed time instead of landing as a fixed share of the shortfall. The clock ends on April 15, 2027 for a calendar-year 2026 taxpayer, and paying the shortfall ends it sooner. And the computation runs installment by installment. The 2025 Instructions for Form 2210 state it plainly: “The penalty is figured separately for each installment due date. Therefore, you may owe the penalty for an earlier due date even if you paid enough tax later to make up the underpayment.”
The rate itself comes from 26 U.S.C. 6621. In news release IR-2026-98, dated Aug. 21, 2026, the IRS announced that interest rates “will remain the same for the calendar quarter beginning Oct. 1, 2026” and listed 7 percent for underpayments by taxpayers other than corporations. The same release gives the mechanism: “For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.” The quarter containing September 15, 2026 carries the same 7 percent, according to the IRS quarterly interest rates table.
Cost per $1,000, computed for this article. The 2025 Instructions for Form 2210 lay the computation out as a worksheet line that multiplies the underpayment by the number of days in a rate period, divides by 365, and multiplies by the rate for that period. September 15 to December 31, 2026 is 107 days. At 7 percent, each $1,000 left unpaid across that stretch accrues 1,000 × 107 ÷ 365 × 0.07 = $20.52, which is about 19 cents per $1,000 per day. Paying 30 days late rather than not at all costs $5.75 per $1,000.
On the $11,000 installment above, a $6,000 shortfall accrues $123.12 between September 15 and December 31, 2026. What happens after that turns on rates the IRS has not announced. The agency sets each quarter’s rate before that quarter opens, and the 2027 quarters were not out as of September 4, 2026. The full run from September 15, 2026 to April 15, 2027 is 212 days; were the first two quarters of 2027 to carry 7 percent as well, the same $6,000 shortfall would accrue $243.95 across the whole period. That second figure is conditional and should be read as one.
The history behind the rate is the reason the conditional matters. The non-corporate underpayment rate sat at 3 percent through every quarter of 2021, climbed quarter by quarter through 2022, reached 8 percent in the fourth quarter of 2023 and held there through 2024, then settled back to 7 percent, with the second quarter of 2026 dipping to 6 percent. A $6,000 shortfall over the same 107 days would have accrued $52.77 at the 2021 rate and $140.71 at the 2024 rate. The statutory rule did not change across those years. The price of ignoring it moved by a factor of nearly three.
The annualized method changes the size, not the date
Section 6654(d)(2) allows a required installment to be computed from income actually earned through the end of a payment period instead of as a flat 25 percent, and Form 2210 carries Schedule AI for that computation. The instructions describe the case it is built for: “If your income varied during the year because, for example, you operated your business on a seasonal basis or had a large capital gain late in the year, you may be able to lower or eliminate the amount of one or more required installments by using the annualized income installment method.” They also attach a condition to using it: “If you use Schedule AI for any payment due date, you must use it for all payment due dates.”
What the method does not touch is the calendar. It can shrink the amount treated as required for the June 1 to August 31 period, and so shrink or erase the shortfall measured on September 15, but the date is fixed by statute. A taxpayer whose 2026 income lands mostly in the fourth quarter can end the year with a small third installment and a large fourth one, and Schedule AI is where that pattern is documented. A taxpayer who simply pays less in September because cash is tight, without the schedule, is measured against the flat 25 percent.
Numbers to Re-check
| Figure | Basis used here | Where to confirm | When it moves |
|---|---|---|---|
| 25 percent per installment | 26 U.S.C. 6654(d)(1)(A) | United States Code, title 26 | Only by legislation |
| 90 / 100 / 110 percent branches | 26 U.S.C. 6654(d)(1)(B) and (C) | United States Code, title 26 | Only by legislation |
| $150,000 AGI limit, $75,000 if filing separately | 26 U.S.C. 6654(d)(1)(C) | United States Code, title 26 | Not adjusted for inflation |
| 7 percent underpayment rate | Quarter beginning Oct. 1, 2026, IR-2026-98 | IRS quarterly interest rates | Set quarterly, announced before the quarter opens |
| $1,000 small-balance exception | 26 U.S.C. 6654(e)(1) | United States Code, title 26 | Only by legislation |
| Due dates April 15, June 15, September 15, January 15 | 26 U.S.C. 6654(c), 2026 tax year | IRS estimated taxes page | Fixed by statute |
Where This Doesn’t Apply
- Small balances. 26 U.S.C. 6654(e)(1): “No addition to tax shall be imposed under subsection (a) for any taxable year if the tax shown on the return for such taxable year (or, if no return is filed, the tax), reduced by the credit allowable under section 31, is less than $1,000.” A shortfall inside that band produces nothing to compute.
- No liability in the prior year. 26 U.S.C. 6654(e)(2) removes the addition where “(A) the preceding taxable year was a taxable year of 12 months, (B) the individual did not have any liability for tax for the preceding taxable year, and (C) the individual was a citizen or resident of the United States throughout the preceding taxable year.” The three conditions are cumulative.
- Waiver situations. 26 U.S.C. 6654(e)(3) provides for waiver by the Secretary in cases of casualty, disaster or other unusual circumstances, and separately for taxpayers who retired after reaching age 62 or became disabled in the tax year or the year before, where the underpayment was due to reasonable cause. Those are determinations the IRS makes, not calculations a taxpayer performs.
- Filers that section 6654 puts on a different schedule. 26 U.S.C. 6654(i)(1) gives a farmer or fisherman “only 1 required installment for the taxable year,” due January 15 of the following year, sized by substituting “66 2/3 percent” for “90 percent” and “without regard to subparagraph (C) of subsection (d)(1)” — no September 15 installment, no 110 percent branch, and no 22.2 percent line. 26 U.S.C. 6654(j) gives a nonresident alien described in section 6072(c) three required installments, the first due June 15 and sized at 50 percent. 26 U.S.C. 6654(k)(1) substitutes the corresponding months for a taxable year that does not begin on January 1.
- Rates beyond 2026. Every figure past December 31, 2026 in this article is conditional on quarterly rates that had not been announced when it was written.
- State estimated tax. States with an income tax run their own installment schedules and their own interest rates. Section 6654 says nothing about them.
- The dollar examples. The $44,000 required annual payment and the $6,000 shortfall are illustrations, not typical figures.
This article explains how the rules are written. It is not tax, legal, or insurance advice, and it does not account for any individual situation. Amounts and thresholds change; verify the current figures at the source listed above before acting, and consult a qualified tax professional about any particular return.
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