How should the 2022 tax forms for a single-person S-Corp look? An example.

scorp_tax.md

How should the 2022 tax forms for a single-person S-Corp look? An example.

I'm a contractor in Minnesota with a single-person LLC. I was gobsmacked by the size of my taxes. Someone recommended filing as an "S-Corp" instead of filing as an individual, in order to not pay self-employment tax.

How, though? This is discussed in lots of blog/forum/Reddit posts, and the answer everyone gives is, "Hire a CPA."

But I like knowing how things work. This is my attempt at crunching the numbers. Note: I have no background in accounting/finance.

Meet our test subject

Let's say their name is Alex.

Alex is an individual in the USA who:

• Sells a single service, like consulting. No products or inventory.
• Has no employees, contractors, or anyone with a "stake" in the company.
• Has no business expenses and no business property. Alex works exclusively from home (but does change sweatpants daily, honest).
• Never travels for work.
• Is single.
• Has no mortgage, investments, retirement accounts, etc.
• Has no other income.
• Is paid exactly $100,000 per year by their client(s).
• Puts all revenue into one business checking account, then twice a month on pay day transfers money into a personal checking account.
• Somehow doesn't live in a US state and so doesn't pay state income tax. For simplicity, I've only included federal taxes below. Presumably state taxes would follow the same trend.

How this works

Below are all the IRS forms Alex would need to fill out. They're organized by:

• How often they're filed (quarterly or yearly).
• For the S-Corp, whether the tax forms are filed on behalf the individual or the employer/corporation.
• The order in which Alex probably do them.

I've omitted any lines that would be "0", left blank, or "No" if a "Yes"/"No" question.

Note that almost all the fields below are calculations. The only "made up" data points are:

Label	Value
Total revenue	$100,000
S Corp Salary	$60,000
S Corp Distributions	$40,000
S Corp Withholding	$12,000/year

---

Filing as an individual

Alex takes the whole $100,000 as plain old income

Quarterly

Alex would have to pay quarterly estimated tax, but that isn't included here because it doesn't really affect the bottom line (assuming Alex does it correctly and doesn't have to pay penalty fees.)

Yearly

1040, Schedule C

Profit or Loss From Business

Line	Description	Value	Notes
1	Gross receipts or sales	100000
5	Gross profit	100000
7	Gross income	100000
31	Net profit or (loss)	100000	If a profit, enter on Schedule 1 (Form 1040), line 3, and on Schedule SE, line 2.

1040, Schedule SE

Self-Employment Tax

Line	Description	Value	Notes
2	Net profit or (loss) from Schedule C, line 31	100000
3	Combine lines...	100000
4a	If line 3 is more than zero, multiply line 3 by 92.35%	92350
4c	Combine lines 4a...	92350
6	Add lines 4c...	92350
10	Multiply line 6 by 12.4%	11451
11	Multiply line 6 by 2.9%	2678
12	Self-employment tax	14129	Enter here and on Schedule 2 (Form 1040), line 4
13	Deduction for one-half of self-employment tax	7065	Enter on Schedule 1 (Form 1040), Line 15

1040, Schedule 2

Additional Taxes

Line	Description	Value	Notes
4	Self-employment tax	14129	Attach Schedule SE
21	Add lines 4... These are your total other taxes	14129	Enter on Form 1040, line 23

1040, Schedule 1

Additional Income and Adjustments to Income

Line	Description	Value	Notes
3	Business income or (loss)	100000	Attach Schedule C
10	Combine lines...	100000	Enter on Form 1040, line 8
15	Deductible part of self-employment tax	7065
26	Add lines... These are your adjustments to income	7065	Enter on Form 1040, line 10

1040

Line	Description	Value	Notes
8	Other income from Schedule 1, Line 10	100000
9	Add lines... This is your total income	100000
10	Adjustments to income from Schedule 1, Line 26	7065
11	Subtract line 10 from line 9. This is your adjusted gross income	92935
12	Standard deduction	12950
14	Add lines...	12950
15	Subtract line 14 from line 11... This is your taxable income	79985
16	Tax	13212
18	Add lines 16 and 17	13212
22	Subtract line 21 from line 18	13212
23	Other taxes, including self-employment tax, from Schedule 2, line 21	14129
24	Add lines 22 and 23. This is your total tax	27341

Summary

Label	Sign	Change
Pay	+	100000
Tax	-	27341
NET	=	72659

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Filing as an S-Corp

Out of the $100,000 in revenue, Alex has decided to be paid $60,000 as a "reasonable salary," and $40,000 as a "disbursement".

Alex has elected to withhold $500 per paycheck.

Corporate, quarterly

941

Employer’s QUARTERLY Federal Tax Return

Line	Description	Value	Notes
1	Number of employees who received wages	1
2	Wages, tips, and other compensation	15000	1/4 x ($60000 salary)
3	Federal income tax withheld from wages	3000	1/4 x ($500 x twice monthly)
5a	Social security tax	1860
5c	Medicare tax	435
5e	Total social security and Medicare taxes	2295
6	Total taxes before adjustments	5295	Add lines 3, 5e, and 5f
10	Total taxes after adjustments	5295	Combine lines 6 through 9
12	Total taxes after adjustments and nonrefundable credits	5295	Subtract line 11g from line 10
14	Balance due	5295

Corporate, yearly, per employee

There's just one "employee" in this case: Alex.

1120-S Schedule K-1

Shareholder’s Share of Income

Line	Description	Value	Notes
1	Ordinary business income (loss)	40000

W2

Line	Description	Value	Notes
1	Wages, tips, other compensation	60000
2	Federal income tax withheld	12000	($500 x twice monthly)
3	Social security wages	60000
4	Social security tax withheld	7440	(1860 * 4)
5	Medicare wages and tips	60000
6	Medicare tax withheld	1740	(435 * 4)

Corporate, yearly

940

Employer’s Annual Federal Unemployment (FUTA) Tax Return

Line	Description	Value	Notes
3	Total payments to all employees	60000
5	Total of payments made to each employee in excess of $7,000	53000
6	Subtotal	53000
7	Total taxable FUTA wages	7000
8	FUTA tax before adjustments	42
12	Total FUTA tax after adjustments	42
14	Balance due	42

1120-S

Income Tax Return for an S Corporation

Line	Description	Value	Notes
1a	Gross receipts or sales	100000
1c	Balance	100000
3	Gross profit	100000
6	Total income (loss)	100000
8	Salaries and wages	60000
20	Total deductions	60000
21	Ordinary business income (loss)	40000

Schedule B

Line	Description	Value
11	Does the corporation satisfy both of the following conditions?	Yes

Schedule K

Line	Description	Value	Notes
1	Ordinary business income (loss)	40000
16d	Distributions	40000
18	Income (loss) reconciliation	0

Schedule M-2

Line	Description	Value	Notes
2a	Ordinary income	40000
6a	Combine lines 1 through 5	40000
7a	Distributions	40000
8a	Balance at end of tax year	0

Individual, yearly

8995

Qualified Business Income Deduction

Line	Description	Value	Notes
1i/c	Qualified business income	40000
2	Total qualified business income or (loss)	40000
4	Total qualified busness income	40000
5	Qualifid business income component	8000	Multiply line 4 by 20%
10	Qualified business income deduction before limitation	8000
11	Taxable income before qualified business income deduction	87050	1040#11 – standard deduction
13	Subtract line 12 from line 11	87050
14	Income limitation. Multiply line 13 by 20%	17410
15	Qualified business income deduction	8000	Enter this amount on Form 1040, Line 13

1040, Schedule E

Supplemental Income and Loss

Line	Description	Value	Notes
28k	Nonpassive income from Schedule K-1	40000
29a/k	Totals	40000
30	Add columns (h) and (k) of line 29a	40000
32	Total partnership and S corporation income or (loss)	40000
41	Total income or (loss)...	40000	Enter on Schedule 1 (Form 1040), line 5

1040, Schedule 1

Additional Income and Adjustments to Income

Line	Description	Value	Notes
5	Rental real etate...	40000	Attach Schedule E
10	Combine lines...	40000	Enter on Form 1040, line 8

1040

Line	Description	Value	Notes
1	Total amount from Form(s) W-2, box 1	60000
8	Other income from Schedule 1, line 10	40000
9	Add lines... This is your total income	100000
11	Subtract... This is your adjusted gross income	100000
12	Standard deduction	12950
13	Qualified business income deduction from Form 8995	8000
14	Add lines 12 and 13...	20950
15	Subtract line 14 from line 11... This is your taxable income	79050
16	Tax	13014
18	Add lines 16 and 17	13014
22	Subtract line 21 from line 18	13014
24	Add lines 22 and 23. This is your total tax	13014
25a	Federal income tax withheld from Form(s) W-2	12000
25d	Add lines 25a...	12000
33	Add lines 25d... These are your total payments	12000
37	Subtract line 33 from line 24. This is the amount you owe	1014

Summary

Label	Sign	Change
Salary	+	60000
Distribution	+	40000
Tax, social security	-	7440
Tax, medicare	-	1740
Tax, individual	-	13014
NET	=	77806

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TLDR

Filing option	Net income, after tax
S-Corp	$77,806
Individual	$72,659

It seems that even in this super-contrived, over-simple example, filing as an S-Corp can indeed let you save considerably more on taxes than filing as an individual. When you factor in the other parts of being an S-Corp that really sweeten the deal — like employer-funded retirement accounts — the advantage gets even bigger.