How Much Does It Cost to File S-Corp Taxes?
The Real Number (and When It's Worth It)
Filing as an S-corp costs more than filing as a sole proprietor — usually $1,500 to $4,000 a year once you add the return, payroll, and state filings. Here's what you're actually paying for, and how to tell if the tax savings beat it.
Filing S-corp taxes usually costs more than filing as a sole proprietor — most owners spend roughly $1,500 to $4,000 a year once you add it all up.That figure isn't just the tax return. An S-corp has to run payroll, file a separate business return (Form 1120-S), and often needs tighter bookkeeping to support it. The real question isn't “what does it cost?” — it's “does the self-employment-tax savings beat that cost?”
By Jason Anderson
Co-Founder, 406 Consulting Group
Big-firm tax background with a Six Sigma discipline for systems and job costing.
Prices vary widely by provider, complexity, and state; the ranges below are typical, not quotes. Confirm specifics with your preparer and state.
What actually goes into the cost?
People hear “S-corp” and picture one tax bill. In practice it's four or five moving parts — and the tax return is only one of them. Here's what a typical owner-operated S-corp pays in a year:
Form 1120-S preparation
$800 – $2,500 / yr
The S-corp's own federal tax return, plus a K-1 to you.
Payroll (required)
$500 – $1,500 / yr
You must run your reasonable salary through payroll — 941s, W-2, state filings.
Bookkeeping to support it
Varies
Clean books the return and payroll can stand on; many owners already pay this.
State S-corp return / fee
$0 – $800+ / yr
Many states add nothing; a few charge their own S-corp tax or minimum fee.
One-time setup (Form 2553)
$0 – a few hundred
Free to self-file; some pay a preparer, plus any new-entity state fee.
The part owners forget is payroll. An S-corp owner can't just take the money out — the IRS requires a reasonable salary run through real payroll, which adds filings a sole proprietor never deals with. That's a cost, but it's also what makes the tax savings legitimate.
Does Montana or my state add anything?
It depends on the state, and this is where the bill swings the most. Some states pile their own tax on top: California, for example, taxes S-corp income at 1.5%, with an $800 minimum franchise tax as the floor (you pay the greater of the two). Montana is friendlier — there's no S-corp franchise tax — but your S-corp still files a Montana pass-through return (Form PTE) on top of the federal 1120-S, so there's still a return to prepare. Before you elect, price your own state, because a high state cost can erase the federal savings.
So is it worth the added cost?
Only if your self-employment-tax savings clear that $1,500–$4,000 of added compliance. That's why the S-corp usually doesn't pay off until your net profit is high enough — often around $80,000–$100,000 — for the savings on your distributions to beat the cost of the payroll, the return, and the state filing.
How it plays out
Say Joe's Plumbing in Kalispell nets $110,000 and the S-corp saves Joe about $6,000 in self-employment tax. Subtract roughly $3,000 for the 1120-S, payroll, and the Montana return, and Joe is still ahead by about $3,000 a year — real money, every year. At $45,000 of profit, those same costs would have wiped the savings out. Same election, opposite answer — it's all about the numbers (illustrative).
Run your own numbers in our S-Corp Calculator, then read the full decision in Should You Elect S-Corp? The Real Math.
Not sure the S-corp savings beat the cost?
We'll run the real math for your profit and your state — and tell you honestly if it's not worth it yet.
FAQ
How much does it cost to file S-corp taxes each year?
For a typical owner-operated S-corp, plan on roughly $1,500 to $4,000 a year once you add the Form 1120-S preparation (often $800–$2,500), payroll (often $500–$1,500), and any state return or fee. Bookkeeping is on top of that if you don't already pay for it. Costs vary a lot by provider, complexity, and state, so treat these as typical ranges, not a quote.
Do I have to run payroll as an S-corp?
Yes. An S-corp owner who works in the business must take a reasonable salary through actual payroll — which means quarterly 941s, a W-2, and state payroll filings. You can't just take distributions. The payroll requirement is both a real cost and the thing that keeps the S-corp's tax savings legitimate, so it's not optional.
At what income does an S-corp become worth the cost?
There's no universal line, but for many owners the self-employment-tax savings don't beat the added compliance cost until net profit is somewhere around $80,000–$100,000. Below that, the payroll, the 1120-S, and any state filing can cost as much as you'd save. Run your actual numbers before electing — our S-Corp Calculator and full guide walk through it.
This article is general tax education, not advice for your specific situation. Costs and state rules vary; confirm your numbers with a qualified tax professional.
The bottom line
An S-corp typically costs $1,500–$4,000 a year to run — the 1120-S, required payroll, and any state filing. It's worth it only when your self-employment-tax savings beat that cost, usually above ~$80K–$100K in profit.
Keep Reading