See how much self-employment tax an S-Corp election could save you. Enter your net profit and a reasonable salary to compare a sole proprietor against an S-Corp. No sign-up, no email, just answers.
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* Estimates only, comparing self-employment tax (sole proprietor) against payroll tax on salary (S-Corp). Does not include federal or state income tax, the QBI deduction, unemployment taxes, or the added cost of running payroll and a separate S-Corp return. The IRS requires a reasonable salary; setting it too low carries audit risk. Consult Angel Quintana, EA at Imperium Tax Services before electing S-Corp status.
Reasonable compensation, the election, and the payroll setup all have to be done right. Angel handles the whole thing as part of entity structuring.
See Entity StructuringAs a sole proprietor, all of your net profit is hit with 15.3% self-employment tax. As an S-Corp, only your salary is subject to payroll tax; the remaining profit is taken as distributions, which are not subject to Social Security and Medicare tax. The difference is the savings this tool estimates.
The IRS requires S-Corp owners to pay themselves a reasonable salary for the work they do before taking distributions. Set the salary too low and you risk an audit. A defensible salary is based on your role, industry, and hours, which is something Angel helps you document.
Yes. An S-Corp adds payroll filing, a separate business return (1120-S), and bookkeeping. The self-employment tax savings usually outweigh those costs once profit is high enough, but not always. This tool shows the tax side; a quick call can confirm whether the full picture makes sense for you.
It depends on your profit, your role, and your goals. As a rule of thumb the math often works once net profit is consistently above the salary you would reasonably pay yourself. Angel Quintana, EA, can run your specific numbers.