Etsy Taxes for Sellers: Quarterly Deadlines (2026)

Tax Disclaimer: This article provides general information about quarterly estimated taxes for educational purposes only. Tax laws are complex and change frequently. We are not tax professionals or attorneys. For advice specific to your situation, consult a qualified CPA or tax advisor who understands e-commerce businesses.

Your first $5,000 quarter on Etsy feels amazing until you realize the IRS expects quarterly payments, not an annual surprise in April.

Most new Etsy sellers don't think about taxes until they get that first 1099-K. By then, they might owe penalties for missed quarterly payments. The good news: once you understand the system, quarterly taxes are straightforward.

Here's what you need to know to stay compliant and avoid penalties in 2026.

When Do Etsy Sellers Need to Pay Quarterly Taxes?

According to the IRS, you typically need to make quarterly estimated tax payments if you expect to owe $1,000 or more in taxes when you file your annual return.

This threshold catches most Etsy sellers who are:

• Running their shop as a sole proprietorship or single-member LLC
• Making a profit after expenses
• Not having taxes withheld from another job that covers the full liability

Who's exempt? If you have a W-2 job and withhold enough to cover your Etsy taxes, you may not need quarterly payments. The IRS cares about your total tax bill, not just your self-employment income.

The profit trigger: Self-employment tax kicks in when your net profit exceeds $400, according to IRS guidelines. That's revenue minus legitimate business expenses. If you sell $10,000 worth of candles but spent $8,000 on supplies, shipping, and fees, your net profit is $2,000. That's when self-employment tax applies.

Self-employment tax is currently 15.3% (12.4% for Social Security, 2.9% for Medicare). You pay this on top of regular income tax. A tax professional can help you calculate your specific liability based on your total income and filing status.

2026 Quarterly Tax Deadlines

The IRS divides the year into four payment periods with slightly uneven dates. Miss these and you'll pay interest and penalties.

2026 Quarterly Tax Deadlines:

• Q1 (Jan 1 - Mar 31): Due April 15, 2026
• Q2 (Apr 1 - May 31): Due June 16, 2026
• Q3 (Jun 1 - Aug 31): Due September 15, 2026
• Q4 (Sep 1 - Dec 31): Due January 15, 2027

Notice Q2 only covers two months, while Q4 stretches into the next calendar year. The IRS works in mysterious ways.

Weekend rule: If a deadline falls on a weekend or federal holiday, it shifts to the next business day. Mark these dates now. Set phone reminders two weeks before each deadline so you're not scrambling.

First-year sellers: If you started your Etsy shop mid-year, you only owe for the quarters you were in business. Launched in August? You'll make your first payment September 15 for Q3.

How to Calculate Your Quarterly Payments

Two methods: the accurate way and the safe way.

The Accurate Method (Current Year Estimate)

1. Estimate your total annual net profit from Etsy
2. Calculate self-employment tax (typically 15.3% of 92.35% of net profit)
3. Add estimated income tax based on your bracket
4. Subtract any tax credits
5. Divide by four

Example: You expect $40,000 net profit this year. You're single with no other income.

• Self-employment tax: $40,000 × 0.9235 × 0.153 = $5,652
• Income tax (estimated 12% bracket after deductions): ~$2,400
• Total estimated tax: $8,052
• Quarterly payment: $8,052 ÷ 4 = $2,013

This method saves money if your income is steady. But if you underestimate, you'll owe penalties.

The Safe Harbor Method (Prior Year)

Pay 100% of last year's total tax liability (110% if your adjusted gross income exceeded $150,000). The IRS won't charge penalties even if you owe more when you file.

Example: Your 2025 tax return showed $6,000 total tax. Pay $1,500 quarterly in 2026 ($6,000 ÷ 4). Even if you actually owe $10,000 for 2026, no penalty applies. You'll just pay the difference in April.

This is the safer approach if your Etsy income fluctuates or you're growing fast. A tax professional can help you decide which method fits your situation.

Uneven income? You don't have to pay equal amounts each quarter. If you make 60% of your annual income during Q4 holiday sales, you can adjust each payment based on actual earnings. Use IRS Form 2210 to calculate the annualized installment method. This gets complex quickly, so consult a tax advisor if you go this route.

What Happens If You Miss a Payment?

The IRS charges an underpayment penalty that's essentially interest on what you should have paid. The rate fluctuates but has been around 7-8% annually in recent years.

How penalties work: The IRS calculates interest from the due date of each quarterly payment until you actually pay. Miss the April payment? You'll owe interest from April 15 until you catch up.

The penalty isn't massive but it adds up. On a $2,000 missed quarterly payment, you might owe $70-140 in penalties depending on when you pay. That's money you could have spent on inventory.

Exceptions: The IRS typically waives penalties if:

• You owed zero taxes last year (no filing requirement)
• Your withholding and estimated payments equal at least 90% of current year tax
• You meet safe harbor rules
• You're a farmer or fisherman (different rules apply)

First-time penalty abatement: If you've never been penalized before and have clean tax filings for the past three years, the IRS may waive the penalty if you ask. This is a one-time courtesy. File Form 843 or call the IRS to request it.

Bottom line: don't panic if you miss one payment, but don't make it a habit. Pay what you can as soon as possible to minimize interest. A tax professional can help you calculate penalties and request abatement if you qualify.

How to Pay Quarterly Taxes

The IRS offers several payment methods. Skip the paper check and use electronic options to get instant confirmation.

IRS Direct Pay (Free)

IRS Direct Pay pulls money directly from your bank account at no charge. You'll need:

• Social Security number or EIN
• Filing status from your last return
• Exact amount from a recent tax return (for identity verification)

The interface looks like it's from 2002, but it works. Schedule payments in advance or pay immediately. You'll get a confirmation number. Save it.

Credit or Debit Card

The IRS accepts cards through third-party processors, but they charge convenience fees around 1.75-1.85% of your payment. On a $2,000 payment, that's $35-37.

This makes sense if you're earning 2% cash back and can pay the balance immediately. Otherwise, you're paying extra for no benefit.

Electronic Federal Tax Payment System (EFTPS)

EFTPS is the IRS's dedicated payment system. It takes a week to enroll, but then you can schedule payments up to a year in advance.

Good for sellers who want to set-and-forget their quarterly payments. Schedule all four 2026 payments in January and you're done.

Same-Day Wire

If you're late and need to pay immediately to minimize penalties, you can arrange a same-day wire through your bank. Fees vary ($10-50 typically). Call the IRS at 800-829-1040 for instructions.

Record keeping: Save confirmation numbers for every payment. If the IRS claims you didn't pay, that confirmation is your proof.

Deductions That Lower Your Quarterly Payments

Every legitimate business expense reduces your net profit, which lowers your quarterly tax bill.

Common deductions Etsy sellers miss:

• Etsy fees - Listing fees, transaction fees, payment processing fees, Etsy Ads spend
• Shipping supplies - Boxes, tape, labels, branded packaging
• Raw materials - Fabric, beads, vinyl, printer ink, anything that goes into your products
• Home office - If you have a dedicated workspace, you can deduct a portion of rent/mortgage, utilities, and internet
• Mileage - Trips to the post office, craft stores, shipping supplies at 67 cents per mile in 2026
• Software - Photo editing tools, accounting software, design subscriptions
• Marketing - Business cards, Facebook ads, promotional samples
• Equipment - Printers, heat presses, cutting machines, cameras
• Professional services - Accountant fees, legal fees, business coaching
• Education - Courses, books, conferences related to your craft or business skills

Use the Etsy Fee Calculator to estimate your annual Etsy fees. That number alone might be 10-15% of your revenue.

Don't forget self-employment tax deduction: You can deduct half of your self-employment tax as an above-the-line deduction. This doesn't reduce your quarterly payments directly, but it lowers your overall tax liability.

Track everything. Use an app like QuickBooks Self-Employed, Wave, or even a simple spreadsheet. When tax time comes, you'll thank yourself. More details in our guide to Etsy seller tax deductions.

Frequently Asked Questions

What taxes do Etsy sellers pay?

Etsy sellers typically pay three types of taxes: federal income tax on net profit, self-employment tax (15.3% covering Social Security and Medicare), and state income tax (if your state has one). Some states also require sales tax collection. You report Etsy income on Schedule C of your federal tax return. For deductions that reduce what you owe, see our 27 Etsy tax deductions guide.

How much tax do you pay on Etsy sales?

You pay taxes on your net profit, not gross revenue. A common rule of thumb is to set aside 25-30% of your profit for federal income tax and self-employment tax combined. Your actual rate depends on your total income, filing status, and deductions. Use our Etsy profit calculator to estimate what you keep after fees, then apply your tax rate to that amount.

Do I need to pay quarterly taxes in my first year?

If you expect to owe $1,000 or more, yes. But the IRS typically won't penalize you in your first profitable year if you didn't know about quarterly payments. Once you're established, ignorance isn't an excuse.

What if my Etsy income varies wildly by quarter?

Use the annualized installment method or pay safe harbor based on last year's tax. You can also adjust each quarter based on actual income so far. A tax professional can walk you through this calculation.

Can I pay more than required?

Absolutely. Treat it like a forced savings account. Overpay during profitable quarters and you'll either owe less in April or get a refund. The IRS doesn't pay interest on overpayments, though, so don't go overboard.

Do I pay quarterly taxes to my state too?

Most states with income tax require quarterly estimated payments using similar rules. Check your state's department of revenue website. States like Texas, Florida, and Washington have no income tax, so you only deal with federal payments.

What if I have a W-2 job and an Etsy shop?

You can increase withholding at your W-2 job instead of making quarterly payments for your Etsy income. Give your employer a new W-4 form requesting extra withholding. The IRS doesn't care where the money comes from as long as you pay enough throughout the year.

I got a 1099-K from Etsy. Do I owe taxes on the full amount?

No. The 1099-K shows gross payments, not profit. You owe taxes on net profit (revenue minus expenses). If your 1099-K says $20,000 but you spent $12,000 on supplies and fees, you're taxed on $8,000. Learn more in our 1099-K guide.

Should I form an LLC to save on taxes?

An LLC doesn't reduce self-employment tax for most Etsy sellers. You'd need to elect S-corp status, which involves payroll, and that's typically only worth it above $60,000-80,000 net profit. Talk to a tax professional before making entity changes.

Can I deduct quarterly tax payments as a business expense?

No. Taxes aren't deductible business expenses (except half of self-employment tax, which is a personal deduction, not a business expense).

Don't Let Tax Season Sneak Up on You

Quarterly taxes feel like a hassle until you make them automatic. Set aside 25-30% of your profit in a separate savings account after every sale. When April, June, September, and January roll around, the money's already there.

Missing payments won't land you in jail, but penalties eat into profit you worked hard to earn. Pay on time, deduct everything you're entitled to, and sleep better knowing the IRS isn't sending you surprise bills.

And seriously, if your Etsy shop is making real money, hire a tax professional. The $300-500 you'll spend typically saves you more than that in found deductions and avoided penalties. This article gives you the framework, but a CPA gives you the specific answers for your situation.

Now go mark those 2026 deadlines in your calendar. Your future self will thank you.