S-CORP TAX PLANNING: PAY YOURSELF RIGHT, KEEP MORE OF WHAT YOU EARN
An S-corp can lower self-employment tax — but only when your salary and distributions are set with intent. We help you plan both.
HOW AN S-CORP ACTUALLY SAVES TAX - AND WHERE OWNERS GO WRONG
The S-corp advantage comes down to one mechanic: you pay yourself a reasonable salary, and the remaining profit comes out as distributions. Your salary is subject to payroll tax; your distributions are not. That split is where the savings live. …Read More
The reasonable-salary line is judgment, not a formula
There is no fixed percentage. A defensible salary reflects your role, the hours you put in, what the work would cost to hire out, and what comparable businesses pay. We help you set and document a figure that holds up — high enough to be reasonable, not so high that you give back the benefit.
The QBI deduction interacts with your salary
The 20% qualified business income (QBI) deduction — made permanent under 2025 tax law — is influenced by the W-2 wages your business pays, including your own salary. Setting compensation without that in view can cost more than the payroll tax it saves. We plan salary, distributions, and QBI together.
The savings only show up with the right setup
An S-corp election means running payroll, filing a separate return, and keeping the formalities. Those costs are real, which is why the election makes sense above a certain profit level and not below it. We help you judge whether you are past that line.
WHAT OUR S-CORP TAX PLANNING COVERS
The election decision
For owners weighing an S-corp, we model the actual payroll-tax savings against the added cost and administration — so the election is a numbers decision, not a default. If you are still choosing a structure, start with Entity Selection & Tax Planning
Salary and distribution planning
We help set a reasonable salary you can defend and structure distributions around it, coordinated with your personal tax position.
Ongoing, year-round strategy
Compensation, retirement contributions, and distributions shift as the business grows. We revisit the plan through the year, not just at filing.
WHO THIS SERVICE IS BEST FOR
Owners considering an S-corp election
Owners considering an S-corp election. If you are weighing the move, we show you the real numbers before you elect.
Existing S-corps that haven’t revisited salary in years
Compensation set when the business was smaller often no longer fits — and an indefensible figure is a risk.
Profitable owner-operators who take regular distributions
The more profit you distribute, the more the salary-versus-distribution decision is worth getting right.
Owners considering an S-corp election
Owners considering an S-corp election. If you are weighing the move, we show you the real numbers before you elect.
Existing S-corps that haven’t revisited salary in years
Compensation set when the business was smaller often no longer fits — and an indefensible figure is a risk.
Profitable owner-operators who take regular distributions
The more profit you distribute, the more the salary-versus-distribution decision is worth getting right.
WHY BUSINESS OWNERS CHOOSE PREMIUM TAX PLANNERS
We name the tradeoffs plainly — including when an S-corp isn’t worth it
If the election would cost more than it saves, we tell you. The goal is the right decision, not a default one.
We plan salary, distributions, and QBI as one decision
These move together. Treating them separately is how owners leave money on the table or invite scrutiny.
We stay involved year-round, not just at the deadline
The best moves happen before year-end, not in April. We work ahead of the calendar.
OUR ENTITY SELECTION PROCESS
Review the entity, compensation, and current tax position
start with how the business is structured, how you are paid today, and where your tax position stands.
Set salary and distribution priorities
We work out a defensible salary and a distribution approach that fits your numbers and your goals.
Guide the next decisions — and keep the plan current
You get clear next steps, and we revisit them as the business changes through the year.
RELATED BUSINESS TAX PLANNING SERVICES
FREQUENTLY ASKED QUESTIONS
It is the work of setting your salary, distributions, and the S-corp election itself with tax efficiency in mind — before deadlines and reporting rules limit your options. The aim is to capture the S-corp advantage without crossing the IRS’s reasonable-compensation line.
In an S-corp, you take a reasonable salary (subject to payroll tax) and the remaining profit as distributions (not subject to self-employment tax). That split can reduce total payroll/SE tax compared with an LLC, where all profit is exposed. The benefit depends on your profit level and a defensible salary.
The IRS requires S-corp owner-employees to pay themselves a salary that reflects the work they do. Set it too low to avoid payroll tax and you invite reclassification, back taxes, and penalties. There is no fixed formula — it is a judgment based on your role, hours, and comparable pay, which is exactly where planning helps.
Usually once profit is high enough that the payroll-tax savings outweigh the added cost of payroll, a separate return, and compliance. Below that level the simpler LLC is often better. We model the breakeven against your actual numbers.
Yes. Premium Tax Planners is based in Northfield, Illinois, and serves the Chicago area and North Shore suburbs, plus clients nationwide through secure virtual meetings.
GET THE S-CORP SPLIT RIGHT BEFORE YEAR-EN
Salary, distributions, and the S-corp election all carry deadlines — and the savings depend on planning them together. Let’s review your setup while there is still time to act.
- Confidential
- No obligation
- Available nationwide