S-Corp Election to Avoid Self-Employment Tax

The S-Corp election to avoid self-employment tax is often oversold for small businesses. The strategy requires paying yourself a "reasonable salary" that the IRS scrutinizes closely, plus quarterly payroll processing costs of $1,000-$3,000/year that eat into savings for businesses earning under $80,000. For a $60,000 business, net savings after fees are only $1,200 annually—cheaper than the cost segregation study (#3) but less impactful than promoters claim. The Augusta Rule (#1) is riskier, but S-Corp still pushes compliance burden.