Calculate Your S-Corp Tax Savings

Payroll Tax Savings Calculator Under an S Corp

This survey only calculates payroll tax savings and does not include income tax calculations, which may also be affected by how you organize your business.

For a sole prop or single-member LLC, you should expect to pay income tax on the combination of the business's net income and your salary (if any), minus taxes.

This survey provides general information and shouldn’t be construed as tax advice.

Since tax rules may change over time and can vary by location and industry, it’s always best to consult a CPA or tax advisor for advice specific to your business.

What is a reasonable salary for an S Corp?

It’s up to you to decide how much employee salary to pay yourself versus how much to take as distributions. Which might sound exciting, except you have to make sure it jives with the IRS rules. Let’s take a look at how to determine a reasonable salary for an S Corp.

Here’s a general rule to follow for an S Corp reasonable salary: Reasonable pay is the amount that similar enterprises would pay for the same, or similar, services. What do workers in your role tend to get paid under an employer? Or, if you were employed in a similar role before, what was your salary as an employee?

The rule isn’t spelled out explicitly in tax law anywhere; instead, the vague guideline has been interpreted through court cases. That adds some extra fun to your compliance effort!

Here are some of the factors the IRS considers to determine whether you’re paying yourself an S Corp "Reasonable Salary":

Training and experience
Duties and responsibilities
Time and effort devoted to the business
Dividend history
Payments to non-shareholder employees
Timing and manner of paying bonuses to key people
What comparable businesses pay for similar services
Compensation agreements
Use of a formula to determine compensation.

The bigger the disparity between the desired “Reasonable Salary” and the net profit, the more you should consider hiring an independent third party “Reasonable Officer Compensation” analysis firm to provide you with an audit-ready report to support your “Reasonable Salary” determination.

Note: The S Corp “Reasonable Salary” requirement only comes into play if you (and other shareholders) take distributions from the company’s profits. The IRS can’t impose a minimum salary requirement, so don’t fret if your business isn’t earning enough yet to pay yourself a salary comparable to others in your field.

Company Name

Owner's Name

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Owner's Email Address

example@example.com

What was your Annual New Income? Revenue Less Expenses

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Desired Salary (W-2) Amount? IRS Requires Owners Pay Themselves A "Reasonable Salary" As An Owner of an S Corporation. The Goal would be to pay yourself as low a salary as possible while STILL maintaining a "Reasonable Salary".

mirrored - Desired Salary (W-2) Amount? IRS Requires Owners Pay Themselves A "Reasonable Salary" As An Owner of an S Corporation. The Goal would be to pay yourself as low a salary as possible while STILL maintaining a "Reasonable Salary".

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S Corp Payroll Taxes (FICA)

S Corp Payroll Taxes (FUTA)

S Corp Net Income

Personal Portion of Payroll Taxes

Schedule C Total Payroll Taxes Paid

S Corp Total Payroll Taxes Paid

Estimated Tax Savings

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Please note this is an estimated tax savings by eliminating Self-Employed tax and reducing your overall FICA exposure. Overall tax savings will differ from state to state.

Estimated Tax Savings

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