See your S-Corp tax savings

An S-Corp is a tax status you can choose with the IRS. It’s not a type of business like an LLC. LLCs give you legal protection. But an S-Corp helps you save on taxes once you're earning real profit.

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Here’s how:

Instead of paying 15.3% self-employment tax on all your income, an S-Corp lets you split it:

• Part as a salary (taxed normally)
• The rest as profit (no self-employment tax)

That split alone can save you thousands of dollars!

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Nope! You can form a corporation and elect S-Corp status directly. But here’s what most solopreneurs do:

• Start with an LLC (because it’s simple and flexible).
• Then file a form with the IRS (Form 2553) to switch to an S-Corp for tax purposes.

Why it matters: The LLC gives you legal protection. The S-Corp gives you tax savings. Best of both worlds!

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An S-Corp saves you money on self-employed taxes by letting you split your income into:

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• A salary (which gets hit by the 15.3% self-employment tax)
• Profit (which doesn’t get taxed the 15.3% rate)

Instead of paying 15.3% self-employment tax on everything like an LLC, you only pay it on the salary portion.

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Real-world example:
Make $100K profit? Pay yourself $50K salary → save $7,500 in taxes.


Yes, it’s legit. And yes, the IRS allows it—if done right.

The IRS expects you to pay yourself a salary that’s fair for your role. Not too low (they don’t want you avoiding taxes), and not over the top.


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Here’s how to calculate a reasonable salary:

• Search sites like Glassdoor or BLS.gov
• Ask yourself: What would I pay someone else to do what I do?

Tip: When in doubt, Keeper’s tax pros can help you set a defensible number.

Here’s what your tax filing form checklist looks like:

• Form 1120-S: This is your business’s tax return
• Form W-2: To report your salary
• Form 941 (quarterly): For payroll taxes
• State returns: If required where you live

Bonus points: You’ll also send yourself a K-1 to show your share of profit.

Absolutely! You can still deduct:

• Form Home office setup
• Client meals & travel
• Health insurance
• Retirement plans like a Solo 401(k)-S: This is your business’s tax return

S-Corp or not, write-offs = less taxable income = lower tax bill if you make any 1099 income.

There are a few downsides to becoming an S-Corp:

• More paperwork (you’ll be filing at least 4 forms a year).
• You’ll have to run payroll  (even if you’re a team of one).
• Not worth it if you’re making under $60K/year

But if you’re growing? The tax savings usually make it very worth it!

It’s easier than you think! Here’s the quick path:

• Keep your LLC as-is
• File Form 2553 with the IRS to elect S-Corp status
• Start payroll and pay yourself a reasonable salary
• File your S-Corp tax return at the end of the year

Pro tip: You’ve got a 75-day window after forming your LLC to make the election for the current year.

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Keeper provides step-by-step guidance from licensed tax pros, if you want to skip the manual work and get it done quickly and accurately!