Tax year 2026
The IRS expects a reasonable salary for the work you do.
Payroll service and the separate 1120-S return. Use your own quote.
Federal Social Security and Medicare only. Income tax, the QBI deduction and state taxes are not included. Talk to a CPA before electing.
How the estimate works
As an LLC taxed the default way, you pay self-employment tax on 92.35% of the profit: 12.4% for Social Security up to the $184,500 wage base for 2026, plus 2.9% for Medicare. As an S corporation, the company and you together pay the same 15.3% on your salary only. The estimate is the difference, less the extra cost of running payroll and filing a separate return.
The salary has to be reasonable for the work you do, which is the main limit on the savings. For the full comparison, see LLC vs S corp.
Standard Filings is a filing service, not a law firm or an accounting firm. This page is general information from each state's published filing rules and fee schedules and IRS publications, not legal or tax advice.
Questions
How does an S corp save tax?+
An LLC owner pays self-employment tax on all of the business's profit. An S corporation owner pays payroll tax only on the salary the company pays them; the rest of the profit is not subject to Social Security and Medicare tax. The savings shrink once you subtract payroll and tax-return costs.
At what profit does an S corp make sense?+
It depends on the salary you must pay yourself and on your extra costs. Enter your numbers in the calculator: when the estimate turns negative, the election costs more than it saves.
How do I elect S corp status?+
File IRS Form 2553 no more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or at any time during the tax year preceding the tax year it is to take effect. An LLC can elect directly with Form 2553 without filing Form 8832 first.