Plug in your profit and see what you'd pay in self-employment tax today against payroll tax as an S corp, after the extra costs of running one. Takes about two minutes, no email needed.
Uses 2026 federal rates: 15.3% payroll tax on wages, with the 12.4% Social Security portion capped at $184,500. It doesn't include income tax, the qualified business income deduction, state taxes or the 0.9% additional Medicare tax, so treat it as a starting point rather than tax advice.
As a sole proprietor or single-member LLC, every dollar of profit is hit with self-employment tax, which is 15.3% on most of it. An S corp splits your income in two. You pay yourself a salary, and that salary carries the same payroll taxes. Whatever profit is left can come out as distributions, and distributions don't carry payroll tax.
That gap is the whole savings. It grows as profit rises above a fair salary for your role, and it shrinks or disappears when profit is close to what you'd reasonably pay yourself anyway. The extra cost of running payroll and filing a separate return comes out of the savings, which is why S corps rarely make sense below roughly $40,000 to $50,000 of profit.
The tax savings are real, but so is the extra work. Before you file the election, it helps to know what you're signing up for.
Your salary goes through payroll every pay period, with taxes withheld and payroll returns filed each quarter. Missing deposits brings penalties quickly.
The IRS looks for owners who pay themselves very little to dodge payroll tax. If your salary is too low, they can reclassify distributions as wages and add back the tax, plus penalties and interest.
The business files its own return, Form 1120-S, due March 15 for calendar-year companies, and you get a K-1 for your personal return. Most owners pay a preparer for this.
Salary, distributions and personal expenses all need to stay separate and documented. Mixing them is the fastest way to lose the benefit in an audit.
A lower salary means less paid into Social Security, which can mean a smaller benefit later. It can also limit how much you're able to put into some retirement plans.
The election is made on Form 2553. To have it apply to the current year, it's generally due within two months and 15 days of the start of the tax year, so March 15 for most businesses.
Balanced works with S corp owners every month. We help you set a salary you can defend, run payroll, keep salary and distributions clean on the books, and work alongside your CPA at tax time. If the S corp doesn't make sense yet, we'll tell you that too.
For most small businesses, somewhere around $40,000 to $50,000 of profit, depending on what a reasonable salary looks like for your role and what you pay to run payroll and file the extra return. Move the sliders above to find your own break-even.
Roughly what you'd have to pay someone else to do the work you do. The IRS looks at your role, hours, industry and what similar businesses pay. There's no fixed percentage, and a salary that looks low next to your profit is the most common thing that draws attention.
Yes. An LLC can elect S corp tax treatment by filing Form 2553 with the IRS. Nothing about the LLC itself changes, only how it's taxed.
No. The calculator looks only at payroll and self-employment tax, which is where the S corp savings come from. Your income tax can shift too, mostly through the qualified business income deduction, so check the full picture with your tax preparer before you elect.
Yes. Our packages cover the monthly books, payroll and reporting, and we keep salary and distributions tracked correctly so tax time is simple for you and your CPA. Book a free discovery call and we'll look at your numbers together.
