The S-Corp Deadline Is in 16 Days. Here's Whether You're Leaving Money on the Table.

There's a legal window open right now that could save you $5,000–$10,000 a year in taxes. It slams shut on March 15, 2026. If you miss it, you wait until 2027 to save that money.

I'm talking about the S-Corp election. And no, it's not just for "big" businesses. If you're pulling in over $60,000 in net freelance profit, this is the conversation you should have been having in January. You've still got time — barely.

Let me give you the real math, the real costs, and the honest answer on whether an S-Corp makes sense for your situation. No upsell. Just numbers.

What an S-Corp Actually Is (Skip the Glossy Pitch)

An S-Corp is not a separate type of company you form from scratch. It's a tax election — a way of telling the IRS how you want your existing LLC (or corporation) to be taxed.

Right now, if you're a sole proprietor or single-member LLC, the IRS treats your entire net profit as self-employment income. That means you pay the self-employment tax — 15.3% — on every dollar you make, up to the Social Security wage base ($176,100 in 2026). Everything above that still gets hit with the 2.9% Medicare portion.

So on $120,000 in net profit: $120,000 × 15.3% = $18,360 just in self-employment tax. Before income tax. Before state taxes. That's the foundation.

An S-Corp lets you restructure that. Here's how it works.

The Mechanics: How the S-Corp Tax Split Works

When you elect S-Corp status, you become both the owner and an employee of your own business. You pay yourself a "reasonable salary" for the work you actually do. That salary goes through payroll — it gets hit with payroll taxes (your half plus the company's half = same 15.3%).

But here's the part that matters: any profit above your salary gets distributed to you as the owner. Those distributions are not subject to self-employment tax.

On that same $120,000 net profit:

  • Pay yourself a reasonable salary of $70,000 → Payroll taxes: $70,000 × 15.3% = $10,710
  • Take the remaining $50,000 as an owner distribution → SE tax on distributions: $0
  • Total payroll tax bill: $10,710 vs. the previous $18,360
  • Gross annual savings: $7,650

That's the headline number. But it's not the whole story. (It never is.)

The Costs Nobody Mentions in the "S-Corp Saves You Thousands!" Posts

I've got a Wall of Shame in my office covered in bounced checks. I built it so I never romanticize money that isn't in my account yet. Apply the same cynicism here.

S-Corp status comes with overhead that will eat your savings if you're not careful:

  • Payroll service: You can't run payroll yourself. You need Gusto, ADP, or equivalent. Budget $50–$120/month ($600–$1,440/year).
  • Additional accounting: Your CPA charges more to file an S-Corp return (Form 1120-S) plus your personal return. Add $800–$2,000/year to your accounting bill, minimum.
  • State fees and taxes: Some states love S-Corps. Others punish them. California, I'm looking at you — they charge an $800 minimum franchise tax plus an additional 1.5% S-Corp tax on net income. If you're in a hostile state, run your own numbers before you file anything.
  • Time cost: Quarterly payroll filings, annual W-2s, quarterly tax deposits. Someone is doing this work. That time has value.

Conservative total overhead estimate: $2,000–$4,000/year.

Back to our $120,000 example: $7,650 gross savings − $3,000 in overhead = ~$4,650 net savings.

That's still real money. That's a quarter of your health insurance premium. That's your IRA contribution. That's not nothing. But it's not the $7,650 fantasy number either — and the YouTube "S-Corp Hack" crowd is definitely not mentioning the overhead when they run the math.

The Break-Even Point (Where It Stops Making Sense)

Here's the number I give everyone who asks me: $60,000 in consistent annual net profit is the approximate floor where S-Corp status starts making financial sense.

Below that, the overhead eats more than you save. At $40,000 net profit, your gross SE tax savings might be $3,000 — which barely covers the extra accounting fees. You've created administrative complexity for a wash. Don't do it.

The math only works if:

  1. You're consistently clearing $60k+ in net profit. Not gross revenue. Net profit. After expenses, software, equipment — everything.
  2. You expect this to continue. If your freelance income is variable and unstable, payroll is a fixed obligation that can bite you when revenue dips.
  3. You have a CPA who handles this. If you're going DIY on S-Corp payroll and annual filings, you will make an expensive mistake eventually. Budget for professional help — it's table stakes for this structure.

The "Reasonable Salary" Rule (Where People Get Into Trouble)

The IRS is not naive. They know that if you could pay yourself $1 in salary and take $200,000 in distributions, you would. They anticipated this.

The law requires you pay yourself a "reasonable salary" for the services you provide — meaning what the market would actually pay someone to do your job. For a senior UI designer in Chicago, that's not $30,000. It's probably $80,000–$110,000.

If you dramatically underpay yourself to maximize distributions, you're flirting with tax fraud. (I'm not your lawyer. But I've seen what happens when this gets audited — penalties, back taxes, interest. It's not a fun spreadsheet.) Pay yourself what the market pays for your role. Take the rest as distributions. The savings are real — just not as dramatic as the "hack" crowd makes them sound.

The March 15 Deadline: What You Actually Need to Do

To elect S-Corp status for the 2026 tax year, you must file IRS Form 2553 by March 15, 2026. That's the 15th day of the third month of the calendar year. Sixteen days from today.

Important: you need to have an LLC or corporation already formed. If you're still a sole proprietor with no entity, you can't elect S-Corp status in time for 2026. That ship has sailed for this year — start the LLC formation now and plan for 2027.

If you have an existing single-member LLC, here's the path:

  1. Call your accountant today. Not next week. Today. Tell them you want to discuss an S-Corp election for 2026. They'll run the numbers for your specific situation.
  2. They'll prepare Form 2553 — the election form — and potentially Form 8832 (entity classification election) depending on your current structure.
  3. File it before March 15. Keep the confirmation. The IRS acknowledges receipt — get that documentation in your files.
  4. Set up payroll immediately after. Your payroll service needs time to get running. Don't wait until April to think about your first payroll run.

The IRS has a late election relief process, but it requires demonstrating "reasonable cause" for missing the deadline. "I didn't know" doesn't reliably work, and the process costs more in accounting fees than it should. Don't plan your backup around it.

My Honest Take After Running This Structure for Six Years

If you're consistently clearing $80,000–$100,000+ in net profit and you haven't elected S-Corp status, you're leaving real money on the table every single year. Not "maybe" money. Real money that funds actual things — health insurance, retirement contributions, emergency reserves.

If you're under $60,000 net, stay simple. The overhead isn't worth it yet. Focus on growing revenue first.

If you're in the $60,000–$80,000 range, run the numbers with your accountant before assuming it works. Your state, your income stability, and your accounting costs all change the math.

(I made the switch in 2020 at $95,000 net profit. Year one, my net savings after all overhead were $4,200. Year two, with the same infrastructure already in place, I saved $5,800. It's not glamorous money. But it's what's currently sitting in my SEP-IRA instead of going to the IRS. I'll take it every time.)

The window closes in 16 days. Stop reading blog posts about it and get on the phone with a CPA who can tell you whether it applies to your actual numbers.

The math doesn't lie. Now go make the call.