By default, the IRS taxes a single-member LLC as a “disregarded entity,” which means single-member LLC taxes are handled on your personal Form 1040 rather than a separate business return. You report the business’s income and expenses on Schedule C, pay regular income tax on the net profit, and owe 15.3% self-employment tax on those same earnings through Schedule SE.1Internal Revenue Service. Limited Liability Company (LLC) The LLC itself files nothing for federal income tax purposes. Everything flows to you.
That disregarded-entity label only applies to income tax. For employment tax and certain excise taxes, the IRS still treats the LLC as a separate entity that files under its own name and EIN.2Internal Revenue Service. Single Member Limited Liability Companies So if you hire employees, the payroll side runs through the LLC even though the income side runs through you.
Self-Employment Tax Is the Big One
No one withholds Social Security or Medicare from your draws, so you pay both halves yourself. The combined self-employment tax rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare.3Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) You owe it once your net self-employment earnings hit $400 for the year.
The Social Security portion stops at the annual wage base, which is $184,500 for 2026.4Social Security Administration. Contribution and Benefit Base Earnings above that cap escape the 12.4% piece. The 2.9% Medicare tax has no ceiling. High earners pay an additional 0.9% Medicare surtax on self-employment income above $200,000 (single) or $250,000 (married filing jointly), bringing the top Medicare rate to 3.8%.5Internal Revenue Service. Questions and Answers for the Additional Medicare Tax
Deduct Half of What You Pay
You can deduct half of your self-employment tax as an adjustment to income.6Internal Revenue Service. Topic No. 554, Self-Employment Tax The deduction goes on Schedule 1 (Form 1040), line 15, and it works whether or not you itemize.7Internal Revenue Service. 2025 Schedule 1 (Form 1040) On $100,000 of net self-employment income, that’s roughly $7,650 off your AGI, which lowers income tax and can preserve eligibility for other benefits tied to AGI.
Quarterly Estimated Payments
Because nothing is being withheld, the IRS expects payments as you earn. You generally have to make quarterly estimated payments if you’ll owe $1,000 or more after credits and any withholding.8Internal Revenue Service. 2026 Form 1040-ES Estimated Tax for Individuals The 2026 due dates are:9Internal Revenue Service. Estimated Tax
- April 15, for income earned January through March
- June 15, for April and May
- September 15, for June through August
- January 15, 2027, for September through December
If a deadline falls on a weekend or holiday, it moves to the next business day. You can pay through IRS Direct Pay or EFTPS, or mail a check with a Form 1040-ES voucher.
The Safe Harbors
Miss or undershoot the payments and the IRS charges an interest-based underpayment penalty. The rate for early 2026 is 7%.10Internal Revenue Service. Interest Rates Remain the Same for the First Quarter of 2026 You avoid the penalty by hitting either safe harbor: 90% of your current-year tax, or 100% of last year’s tax (110% if last year’s AGI was over $150,000).11Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty When your income is unpredictable, matching last year’s number is usually the easier way to stay clear.
Deductions That Cut Both Taxes
Schedule C net profit feeds both your income tax and your self-employment tax, so every business deduction you claim reduces two taxes at once. Tracking expenses well is one of the highest-leverage things you can do.
Common Schedule C Categories
The larger deductions for most single-member LLCs include vehicle expenses (either actual costs or 70 cents per mile for 2025, with the 2026 rate typically announced later in the year), office supplies, advertising, business insurance, contract labor, interest on business loans, professional fees, and depreciation on equipment.12Internal Revenue Service. Instructions for Schedule C (Form 1040)
Home Office
If you use part of your home exclusively and regularly for the business, you can deduct those costs. The simplified method is $5 per square foot up to 300 square feet, for a maximum $1,500 deduction.13Internal Revenue Service. Simplified Option for Home Office Deduction The regular method prorates actual rent, utilities, and insurance by square footage. More paperwork, usually a bigger deduction.
Self-Employed Health Insurance
If you pay your own medical, dental, or vision premiums and aren’t eligible for coverage through a spouse’s employer, you can deduct 100% of the premiums as an adjustment to income. The plan has to be established under your business, though it can be in your name or the LLC’s.14Internal Revenue Service. Instructions for Form 7206 The deduction also covers your spouse, dependents, and children under 27.
Qualified Business Income
The Section 199A deduction let eligible pass-through owners deduct up to 20% of qualified business income. Under the original 2017 law, it was available for tax years ending on or before December 31, 2025.15Internal Revenue Service. Qualified Business Income Deduction Whether Congress has renewed it for 2026 is worth confirming with a tax professional or the IRS before you file, because the deduction has been worth thousands to many LLC owners.
When to Elect Corporate Tax Treatment
The disregarded-entity default is not permanent. Once profits climb, the self-employment tax bill can grow large enough that changing your tax classification saves real money.
S-Corporation Election
The more common move is filing Form 2553 to elect S-corp treatment.16Internal Revenue Service. About Form 2553, Election by a Small Business Corporation For the election to take effect in the current tax year, you have to file within two months and 15 days of the start of that year. For calendar-year LLCs, that’s March 15. You can also file anytime during the prior year. If you miss the deadline, the IRS may allow a late election on a showing of reasonable cause.17Internal Revenue Service. Instructions for Form 2553
The idea is simple: you pay yourself a reasonable salary through payroll (which is subject to Social Security and Medicare withholding), and take the remaining profit as distributions that are not subject to self-employment tax. The salary has to be genuinely reasonable for the work you do. Courts have repeatedly held that S-corp shareholders providing more than minor services must receive appropriate compensation, and the IRS can reclassify distributions as wages when a salary looks artificially low.18Internal Revenue Service. S Corporation Employees, Shareholders and Corporate Officers You also take on payroll processing and a separate Form 1120-S return each year.
C-Corporation Election
Filing Form 8832 elects C-corp treatment.19Internal Revenue Service. Form 8832 – Entity Classification Election The corporation pays its own income tax, and profits paid to you as dividends get taxed again on your personal return. That double layer keeps this election uncommon for small LLCs, though it can fit owners who plan to keep significant earnings inside the business.
Penalties If You File or Pay Late
The IRS charges separate penalties for filing late and paying late, and they stack. The failure-to-file penalty is 5% of the unpaid tax per month, capped at 25%.20Internal Revenue Service. Failure to File Penalty The failure-to-pay penalty is 0.5% per month on the unpaid balance, also capped at 25%; it drops to 0.25% under an approved payment plan and jumps to 1% if you ignore a notice of intent to levy.21Internal Revenue Service. Failure to Pay Penalty
If you can’t pay by April 15, file anyway. The filing penalty runs ten times the payment penalty, so submitting on time and arranging a payment plan is almost always the cheaper path.
EIN: When You Actually Need One
A single-member LLC with no employees and no excise tax filings does not need an EIN for federal tax purposes. You use your Social Security number on Schedule C.2Internal Revenue Service. Single Member Limited Liability Companies You do need one if you hire employees or have to file excise tax returns. Many owners get an EIN anyway because banks usually require it to open a business account, and it lets you avoid giving your SSN to clients and vendors.
State Taxes Are a Separate Layer
Federal filing isn’t the whole picture. Most states require an annual report or franchise tax to keep the LLC in good standing, and the fees vary widely: some states charge nothing, others several hundred dollars a year. If you sell physical goods, you’ll also collect and remit state sales tax. Rules and deadlines differ by state, so check with your state’s Department of Revenue or Secretary of State for what applies to you.