FOR ETSY SELLERS

Her Etsy Shop Made $118K. Taxes for Etsy Still Cost Her $13,900.

Etsy collected tax on every order. None of it was hers, and none of it covered the $13,900 she owed.

Mara's shop, Rosie Lane Co., sold $118,000 in personalized baby blankets last year, most of it in one blistering six-week summer stretch. She had Googled taxes for Etsy at midnight more than once, calculator in one tab and shop stats in the other. Then April came, and the number she owed had nothing to do with the number she thought she had saved.

Book Free Review

Real accountants Flat monthly pricing Taxes filed for you

Phoenix · August 28, 2026 · 6 min read

One shop. Two Aprils.

$118,000

in Etsy sales, mostly in six summer weeks

“I built a six-figure shop and it still felt like a hobby to the IRS, right up until I owed them $13,900. Once someone showed me the actual math, I felt like a business owner for the first time. Not just a girl with an Etsy shop.”

Mara · Owner, Rosie Lane Co.

The Story

$118,000 in sales, $71,000 in profit, and nothing set aside

Mara did not think of herself as running a business that could owe five figures in taxes. She thought of herself as someone with a little Etsy thing that happened to be paying her mortgage. Every order showed a line labeled tax collected, so she assumed taxes were handled the way they had been at her old W-2 job. She never set aside a dollar of her own, never made a quarterly payment, and the bill arrived with a penalty attached.

Rosie Lane Co., as the IRS saw it

Etsy sales$118,000

Net profit$71,000

Set aside for income tax$0

Quarterly payments made0

Owed in April, penalty included$13,900

The Problem

Etsy's tax collected line is not your tax bill

Her wake-up call came from an Etsy support chat, not an accountant. The rep explained that the tax Etsy collects and remits is sales tax, owed to the buyer's state under marketplace facilitator law. It has nothing to do with federal income tax or the 15.3 percent self-employment tax on her own profit. Sellers describe this blind spot in the same words every time: I figured Etsy was taking care of that. TurboTax at year end and a friend's generalist CPA never asked what the shop made month by month either.

Ecommerce product — Sales tax goes to the buyer's state. The 15.3 percent self-employment tax on $71,000 of profit was hers alone.

What We Tried

TurboTax in April and a CPA who just looked it over

Mara ran everything through TurboTax at year end. She asked a friend's generalist CPA to just look it over. Neither one asked what her shop actually made month by month or what she needed to set aside before the bill arrived. Generic bookkeeping software tracks what came in and went out. It never tells you what you keep, or what you owe the government on it, while there is still time to do something.

What each one told her before April

	TurboTax	Friend's CPA
Separates sales tax from her income
Knows monthly profit, not just gross
Calculates quarterly estimates	Year end	If asked
Moves tax aside as sales land
Flags S-corp territory		Rarely

Sound familiar? A 30-minute call tells you exactly where you stand.

Book Free Review

Free 30-minute review. No pitch deck.

The Discovery

Four signs your shop stopped being a hobby, admitted or not

The IRS lowered the 1099-K reporting threshold in recent years, so far more sellers now receive a form that makes the shop look official without anyone explaining what that means. The line from hobby to business is not a feeling. It is a set of facts. Mara checked three of the four, and the IRS taxes a shop that clears them the same way it taxes a six-figure consulting firm.

Do this today: Count how many of the four you check. Two or more and you need a quarterly plan this month.

Mara checked 3 of 4

Made more in one summer than the old salary paid in three months
Reinvesting profit into inventory before paying herself
Never set aside money labeled taxes, separate from checking
Got a 1099-K and had no idea what to do with it

The FixAMADAE

Books that match the shop, quarter by quarter

Amadae connects to actual Etsy sales, a real accountant categorizes cost of goods, packaging, and fees as they happen, and sales tax is separated from income the moment an order comes in, so the money in her account is money she is allowed to keep. Then it handles the part nobody taught her: what she owes each quarter, moved into a holding account and filed on time, with the S-corp question flagged when profit crosses the line. No more 25 percent panic-savings rule. No more finding out in April.

Book Free Review

Her April bill, two springs in a row

Before, with a penalty$13,900

The next spring, with Amadae$340

Her numbers. The $340 was a small true-up; the rest was already set aside quarter by quarter.

The Proof

The following spring, her tax bill was $340

Not $13,900. Not a penalty on top of it. Just a small true-up, because the real number had already been set aside, quarter by quarter, all year. The shop did not get smaller. The surprise did.

Mara

Owner, Rosie Lane Co.

$13,900 bill became a $340 true-up

Why NowAMADAE

September 15 lands in the middle of back-to-school prep

Every September, Etsy sellers face the same collision: the Q3 deadline arrives right when this summer's profit is already earmarked for fall inventory. That is the exact window Mara's shop was in when her letter came. The size of your shop does not decide whether you owe self-employment tax; your profit does. The intro call is free, there is no long-term contract, and it ends with what you should be setting aside right now.

Book Free Review

15.3%

self-employment tax on every dollar of net profit, at $40,000 a year or $400,000

IRS Schedule SE

One shop. Two Aprils.

$118,000

in Etsy sales, mostly in six summer weeks

$13,900

owed the first April, penalty included

$340

owed the next April, after quarterly set-asides

15.3%

self-employment tax Etsy never collects for you

One client, with permission. Your numbers will differ.

Accounting built for a shop that outgrew the hobby

Books, payroll, and taxes from real accountants, for one flat monthly price starting at $249.

Etsy sales, fees, and cost of goods categorized by a real accountant
Sales tax separated from your income the moment an order lands
Quarterly estimates calculated, set aside, and filed
S-corp setup, payroll, and year-end returns included

Book Free Review

No long-term contract. Cancel any time. The intro call is free.

Plans from

$249/mo

If you make $40K - $69K. Flat, no hourly bills.

Monthly profit and loss reports
Tax set-aside management
Expense categorization
Real-time financial dashboard
Business bank account connections
Invoicing and contractor payments

Book Free Review

Cancel any timeReal accountantsTaxes filed for you

Straight answers

Questions creators ask us

But my shop isn't big enough to need this yet.+

Mara said that too, before her first penalty. A $40,000 year and a $400,000 year both get taxed on every dollar of net income. The only difference is how many zeroes are on the surprise.

What if I claim a write-off wrong or set up an entity that backfires?+

That fear is why so many sellers claim nothing and quietly overpay every year. The fix is not guessing less aggressively. It is having a real accountant build the plan with you instead of filing whatever you hand them.

Does Etsy send anything to the IRS about me?+

Yes. Above the 1099-K threshold Etsy reports your gross sales, and the threshold has come down in recent years. If you sold more than a few thousand dollars this year, expect the form.

Stop guessing at taxes for Etsy season after season

We will look at your actual shop numbers, tell you what to set aside right now, and show you where your books and entity stand before the next deadline hits.

Book Free Review

Keep reading

Etsy Taxes Cost Her $9,400. She Never Should Have Owed It.

Etsy taxes caught a six-figure seller off guard until a books review found she'd overpaid $9,400. Here's exactly where the money leaked, and how to check your own before the next 1099-K.

7 Things Nobody Tells You About Etsy and Taxes Until the IRS Sends a Letter

Etsy and taxes look simple until your shop crosses $5,000 and the 1099-K shows up. Here are 7 things sellers wish they knew sooner. (7 min read)

Her Income Tax Service Filed Everything Right. It Still Cost Her a $180,000 Mortgage.

Most income tax service providers just file your return and move on. See why that gap stalled one consultant's mortgage for 11 days, and cost her $11,400 a year in missed savings.