Guide

Estimated taxes and self-employment tax: what they are

When you work for yourself, tax is not taken out of your income automatically. This guide explains in plain English what the IRS expects and when.

General information only, not legal or tax advice. I am not a lawyer, a CPA or an accountant. Flipfiled does not prepare tax returns or give legal advice. This page explains what government sources say. Rules, rates and fees change, so confirm with the agency. The dollar examples are made up to show the math.

The short version

• When you work for yourself, nobody withholds tax from your income. The IRS expects you to pay during the year through estimated tax payments.
• Self-employment tax is the Social Security and Medicare tax people who work for themselves pay. The IRS rate is 15.3%.
• Estimated payments are due four times a year, not on a monthly sales tax schedule. Sales tax and income tax are separate.
• This page explains what the rules are. It does not tell you how much you owe or should pay. A CPA does that.

What is self-employment tax?

The IRS says the self-employment tax rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. The Social Security part applies only up to an annual wage base, which this site’s S corp vs LLC guide lists as $184,500 for 2026. Medicare applies to all net earnings, and an additional 0.9% Medicare tax applies above certain income levels.

• You owe it if your net earnings from self-employment were $400 or more.
• You figure it on Schedule SE. Sole proprietors and independent contractors generally use Schedule C to figure net earnings.
• You can deduct the employer-equivalent part of the tax when figuring your adjusted gross income. That deduction affects income tax only.

A rough, made-up illustration: if net earnings were $30,000, 15.3% is $4,590. The actual calculation on Schedule SE adjusts the net earnings figure, so this is only to show the scale. Source: IRS: Self-employment tax (opens in a new tab).

Not every business owner pays self-employment tax the same way. How your LLC is taxed matters. See what an LLC does and does not do, S corp vs LLC and Schedule K-1 explained.

What are estimated taxes?

The IRS says individuals, including sole proprietors, partners and S corporation shareholders, generally must make estimated payments if they expect to owe $1,000 or more when they file their return. (Corporations use a $500 threshold.) The payments cover income tax and, for self-employed people, self-employment tax. Source: IRS: Estimated taxes (opens in a new tab).

When are payments due?

The IRS lists these 2026 dates:

The IRS also says that if a due date falls on a weekend or legal holiday, a payment on the next business day counts as on time. Source: IRS Taxpayer Advocate Service: important tax dates 2026 (opens in a new tab).

How are payments made?

The IRS says you can mail payments with Form 1040-ES, or pay online at IRS.gov/payments, by phone, or through the IRS app. Keep a record of every payment. Illinois has its own estimated payments too. The Illinois Department of Revenue says estimated payments are generally required when your Illinois income tax exceeds withholding and credits by more than $1,000 for individuals.

What if I do not pay enough?

The IRS says you generally avoid the underpayment penalty if you owe less than $1,000 after withholding and credits, or if you paid at least 90% of the current year’s tax or 100% of the prior year’s tax, whichever is smaller. If your income came unevenly (a reseller’s holiday season, for example), the IRS says you may be able to reduce the penalty by annualizing on Form 2210. Illinois charges a late-payment penalty of 2% if less than 31 days late and 10% if 31 or more days late on required estimated payments. Sources: IRS: Estimated taxes (opens in a new tab); IDOR: penalty for not making estimated payments (opens in a new tab).

Why this matters for resellers

• Your profit is what is taxed, not your sales. That is why tracking expenses and cost of goods sold matters.
• Sales tax you collect is not your money and is not part of this. See why compliance matters.
• Many owners set aside a share of each payout in a separate account. How much to set aside is a question for a CPA.
• If you receive a Form 1099-K from a platform, see Form 1099-K for resellers.

Questions for a CPA

• Do I need to make estimated payments this year, and how much?
• How is my business taxed, and how does that change self-employment tax?
• Do I also owe Illinois estimated payments?
• What are the safe-harbor rules for my income?

I am not a CPA or an attorney

This page is general information, not tax or legal advice. Flipfiled does not prepare tax returns or calculate what you owe. Rates, thresholds and dates change every year, so check the IRS and Illinois Department of Revenue sites or ask a CPA. The 15.3% rate and $400 threshold come from the IRS self-employment tax page I reviewed, which listed 2024 wage-base figures; use the current year’s amounts. Checked Oct 30, 2026.