What payroll costs an S corp owner

Once you elect S corp status and keep working in the business, you're an employee of your own company. So you need real payroll. Tax deposits, a return every quarter, a W-2 in January, an account with the state's unemployment agency. A sole proprietor or single-member LLC owner skips all of that. It's the main running cost an S election adds.

The taxes on an owner's salary

You own the company, so both halves come out of the same pocket anyway. Your half gets withheld from your paycheck. The company's half is a business expense, and the S corp deducts it.

FUTA

FUTA, the federal unemployment tax, is 6.0% of the first $7,000 each employee earns. Pay your state unemployment tax on time and you get a credit of up to 5.4%. That leaves 0.6%, which is $42 a year per employee.

Some states are credit reduction states, and there the credit shrinks. Schedule A of Form 940 for 2025 has California at 1.2% and the U.S. Virgin Islands at 4.5%. So a California employer paid 1.8% on the first $7,000 for 2025, $126 per employee. The 2026 list won't be out until after November 10, 2026.

State unemployment

Every state picks its own wage base and gives new employers a starting rate. Two examples for 2026:

• California: the EDD taxes the first $7,000 of wages at 3.4% for a new employer, for two to three years. On one salary that's $238 a year. There's also a 0.1% Employment Training Tax on the same $7,000.
• Texas: the TWC taxes the first $9,000 at a 2.7% entry rate. That's $243 a year.

Some states also take disability or paid leave money out of the employee's pay. California withholds 1.3% of all wages for SDI.

The forms

• Form 941 every quarter. It's the federal payroll return: wages, the income tax you withheld, and both halves of Social Security and Medicare.
• Form 940 once a year, for FUTA.
• Form W-2 for you as the owner, plus Form W-3, which sends the W-2s to the Social Security Administration.
• State returns. Nearly every state wants a quarterly unemployment wage report, and states with an income tax want withholding returns too.

Filing the returns is only half the job. The tax money itself goes in electronically during the year, and Publication 15 has the schedule. Reported $50,000 or less of payroll taxes in the lookback period? Then you're a monthly depositor, and each month's taxes are due by the 15th of the next month. Most one-owner S corps land here. FUTA only has to be deposited once a quarter's amount goes over $500. One owner on salary never gets there in a quarter, so it's paid with the year's Form 940.

2026 deadlines

Those dates come from the Form 941 instructions: April 30, July 31, October 31 and January 31, pushed to the next business day if one lands on a weekend or holiday. The W-2 instructions say February 1, 2027 for 2026 forms. Form 940 uses the same January 31 rule, per Topic 759, and you get 10 extra days if you deposited all FUTA on time.

Worked example: one owner on a $40,000 salary in Texas

On top of that, $3,060 comes out of the owner's paycheck for their own half of Social Security and Medicare. Add it up and the company and the owner pay $6,405 in payroll taxes on that salary.

Paying someone to run it

Most owners pay a payroll service instead of doing this by hand. That's probably smart, since a late deposit gets a penalty even if the return went in on time. Payroll services don't have an official price. StructureCost assumes $1,800 a year for an S corp, and that covers the payroll service and the extra business return (Form 1120-S) together. If your quotes differ, adjust in your head. Running payroll yourself in a state with no income tax costs less. A full-service accountant costs more.