Our S Corp Tax Calculator estimates whether a business owner can benefit from being taxed as an S Corporation compared to a sole proprietor and any tax savings that could be gained from making the switch. If you're interested in seeing if our company SLP Wealth could help you with your S Corp needs, please contact logan.foltz@slpwealth.com and share a bit about what you're looking for.

What is your anticipated Business Gross Revenue in 2024

Anticipated business expenses in 2024 (exclude wages)

What Would Be Your S Corp W-2 Reasonable Compensation? (based on profession, hours, and location)

How much in W-2 wages do you pay to employees? (if you have no employees besides yourself, list $0)

Tax Filing Status

List your spouse's income

Do you earn money from a W-2 job unrelated to your business?

List how much you earn from this unrelated W-2 job

Does your business primarily provide professional services?

S Corp Additional Expenses

Additional Cost of S Corp Tax Preparation

Cost of Payroll Provider

State Incorporation/Annual Fee

Other S-Corp Specific Expenses

Result
Net Benefit of S Corp

Components of Net Benefit of S Corp Calculation

Payroll Tax Savings from S Corp
QBI Tax Savings from S Corp
Additional S Corp Filing Costs

Business Performance

Sole-Proprietor S-Corp
Gross Revenue
Business Expenses
Net Profits
W-2 Wages
Business Distributions
QBI Deduction

Payroll Taxes

Sole-Proprietor S-Corp
Social Security Tax
Medicare Tax
Additional Medicare Tax
FUTA Tax
Total Payroll Taxes

Your Max Retirement Contribution Limits (estimated)

Sole-Proprietor S-Corp
Solo 401k
SEP IRA
Simple IRA
IRA (Backdoor, Roth, or Traditional)

QBI Section

Sole-Proprietor S-Corp
Qualified Business Income (QBI)
QBI Deduction / 199A Deduction
Total Taxable Income After Standard Deduction
Phaseout status
Total federal tax savings

Detailed QBI Calculations

Below Phaseout Calculations
20% QBI
20% Taxable income
Deduction Allowed (lessor of these 2 numbers)
In Phaseout Range Calculations
20% QBI
50% of wages paid
Reduction of QBI
Deduction Allowed
Above Phaseout Range Calculations
20% QBI
50% of wages paid
Deduction Allowed (lessor of these 2 numbers, or 0 if you're a professional service business)


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What is an S Corp?

An S-corporation functions as a pass-through entity, allowing you to report business income and losses on your tax return. As a result, taxes are calculated at individual income tax rates, preventing double taxation on corporate income.

An LLC is a legal entity, but the IRS disregards it for tax purposes. This means that a single-member LLC is automatically taxed as a sole proprietorship, and a multi-member LLC is taxed as a partnership. However, by filing IRS Form 2553, the default tax treatment can be changed, and the LLC can elect to be taxed as an S-corporation.

Why consider S Corp?

When you elect S-corp tax treatment, you earn money through two means:

  • Salary: The amount you pay yourself via W-2 wages.
  • Distributions: Profits pass through the S-corp directly to you, not considered employee wages or treated as self-employment income.

When you file taxes as an S-corp, you'll need to pay payroll taxes on your salary, similar to any W-2 job. However, you're not required to pay these taxes on distributions from your S-corp. This means that if you categorize more of your income as distributions and less as wages, you can save more money on payroll taxes.

What's “reasonable compensation”?

The IRS requires owner-employees of S-corporations to receive “reasonable compensation” through W-2 wages, which means they must receive a salary. “Reasonable compensation” generally refers to the amount you would need to pay someone to replace your role as a physician and any other responsibilities you have within the business. This amount can be substantial.

The concept of “what is a reasonable compensation” is a heavily debated topic within the S-corp discussion. It can cause problems if you aren't careful. Be sure to consult a tax professional for help determining reasonable compensation.

Other S Corp considerations

Some potential downsides to filing as an S Corp include:

  • S-corp filing fees – tax filing preparation often costs more for S Corps than sole proprietorships.
  • Loss of qualified business income (QBI) deduction – an S-corp can take away from your QBI deduction because anything you pay in wages doesn't count toward QBI.
  • Limit on 401(k) contributions – you can generally only contribute 25% of your wages, which doesn't include distributions.

More resources:

Tax Planning for Physicians: What Are the Benefits of Using S-Corp Tax Strategies?