The S-election is a real, IRS-blessed way to stop overpaying 15.3% self-employment tax. But only above a break-even line — and only if you pay yourself a reasonable salary. Below that line, it costs you money and invites an audit.
This Playbook is the honest antidote: real payroll math, the actual court cases, and three calculators that tell you the truth about your own numbers.
Reels give you a fantasy. These give you your break-even, your defensible salary range, and your honest net savings — after the payroll and CPA costs the gurus never mention.
How much self-employment tax the S-election could save you this year — net of the extra costs, and net of the QBI deduction you give up on salary.
Full breakdown is a paid feature. The headline savings number is free — unlock the line-by-line math, QBI impact & salary range below.
Unlock full reportEstimates only, for education. Payroll-tax math uses 2026 figures (12.4% Social Security to $184,500 + 2.9% Medicare, +0.9% above $200k/$250k). QBI (§199A) impact is approximated at 20% of salary × your estimated marginal rate; the actual deduction has wage/SSTB limits above the income thresholds. Real numbers depend on your full return — confirm with a licensed CPA or EA.
There is no "60/40 rule" and no "10% of revenue" rule — that's folklore. The IRS test is comparability: what would you pay someone else to do your job? This estimates a defensible range and shows the full risk spectrum.
The $0-salary trap: in Radtke, a $0-salary attorney had 100% of distributions reclassified as wages. In Watson, a CPA's $24k salary was bumped to ~$91k by the court (upheld to the Supreme Court). ~73% of S-corp audits center on reasonable comp; the average extra assessment is roughly $31k. Aggressive ≠ illegal — but it must be documented. This is education, not a comp study; a formal study (or your CPA) makes it audit-proof.
The one question the gurus dodge: at what profit does the S-corp actually start paying off? Below your break-even, the payroll + CPA costs eat the tax savings. Here's your line.
Rule of thumb the honest CPAs use: the S-corp math typically works once net profit consistently clears ~$50k–$60k above your reasonable salary. The break-even shown here is where distribution-side SE-tax savings (≈15.3% up to the wage base, ≈2.9% above) exactly offset your annual admin cost. Estimates only — verify with a professional.
Most people asking about S-corps shouldn't elect yet — and that's the honest answer no reel will give you. Five questions.
No gimmicks. Just the mechanics the reels skip — the parts that keep your money and keep you out of an audit.
The quiz and your headline savings number are free forever. Everything that turns a number into a done, audit-ready decision lives inside.
The S-Corp Question is Book II of the Small Business Tax Fortress — five Playbooks that stack into one defense system for your money.
An S-corp is a legal + financial machine. Here's who keeps mine running — and how you can plug in the same support.
What you received here has real dollar value — a CPA consult on this alone runs a few hundred. If it brought you value, plant a seed. No pressure, only karma.
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