Quick answer
An S-corp owner who works in the business must take a reasonable salary through payroll. Payroll software withholds taxes, files quarterly Form 941 and year-end W-2s, and pays state taxes for you.
- Best all-around for a solo S corp: Gusto (Simple about $49/month + $6 per person) or OnPay (about $49/month + $6 per person).
- Lowest cost: Patriot (full service about $37/month + $5 per person).
- Best if you use QuickBooks Online: QuickBooks Payroll (from about $45/month plus per person).
- Best if you use Wave: Wave Payroll (about $40/month + $6 per person in tax-service states).
- Best for growing teams: ADP RUN (custom quote).
Prices are approximate as of September 2026. Check each provider for current plans and state coverage.
Why S-corp owners need payroll
An S corporation pays the owner in two ways: W-2 wages and distributions. Wages carry Social Security and Medicare taxes. Distributions do not. That is the main S-corp tax advantage.
The IRS expects owner-employees to receive reasonable compensation for their work before taking distributions. Skipping salary to avoid payroll taxes is a well-known audit issue.
Running payroll means:
- Withholding federal income tax, Social Security (6.2%) and Medicare (1.45%) from each paycheck
- Paying the employer’s matching 7.65%
- Depositing taxes on schedule and filing Form 941 each quarter
- Filing Form 940 for federal unemployment (FUTA) each year
- Issuing a W-2 and filing W-3 by January 31
- State withholding and state unemployment filings
The Social Security part applies to wages up to $184,500 in 2026.
Comparison table
| Software | Price (approx.) | Tax filings included | Good for |
|---|---|---|---|
| Gusto Simple | $49/mo + $6/person | Federal and state | Easy setup, benefits options |
| OnPay | $49/mo + $6/person | Federal and state, multistate included | Flat pricing, no contract |
| Patriot Full Service | About $37/mo + $5/person | Federal and state on full service | Lowest cost |
| QuickBooks Payroll | From about $45/mo + per person | Federal and state | QuickBooks Online users |
| Wave Payroll | About $40/mo + $6/person | In tax-service states | Wave accounting users |
| ADP RUN | Custom quote | Federal and state | Owners planning to hire |
Some providers charge less in an owner-only setup or run first-month discounts. Features such as next-day deposit or time tracking often sit on higher tiers.
Features that matter for S-corp owners
Owner-only payroll
Make sure the software handles a company where the only employee is the owner. Most do, but check how it treats officer wages and state unemployment exemptions, which vary by state.
Shareholder health insurance
If the S corp pays health insurance for a more-than-2% shareholder, the premiums go into the owner’s W-2 box 1 wages. They are generally not subject to Social Security or Medicare tax. Your payroll software needs to add this, usually in the last payroll of the year. See Self-Employed Health Insurance Deduction.
Retirement contributions
If you run a Solo 401(k), the software should handle employee deferrals from salary. Check whether it syncs with your plan provider.
Payroll frequency
Many solo owners run payroll monthly or quarterly to keep it simple. Pricing is usually monthly regardless of how often you pay.
Worked example: a one-person S corp
Nina’s design S corp earns $100,000 of profit before paying her. She sets a salary of $60,000, based on what similar roles earn.
| Item | Amount |
|---|---|
| Employee Social Security and Medicare (7.65% of $60,000) | $4,590 |
| Employer Social Security and Medicare (7.65% of $60,000) | $4,590 |
| FUTA (0.6% of first $7,000, with full state credit) | $42 |
| Payroll software ($49 + $6 per month × 12) | $660 |
Total Social Security and Medicare: $9,180. As a sole proprietor, self-employment tax on the same $100,000 would be about $14,130 (15.3% of 92.35%).
That gap of about $4,950 is the rough payroll tax saving, before software, state unemployment tax, a separate Form 1120-S return and higher accounting fees. The salary must still be reasonable. See Self-Employment Tax Explained and Sole Proprietorship vs LLC for Freelancers.
Payroll deadlines to know
Even with software, you should know the calendar:
| Filing | When |
|---|---|
| Federal tax deposits | Monthly or semiweekly, based on your deposit schedule |
| Form 941 | Quarterly: April 30, July 31, October 31, January 31 |
| Form 940 (FUTA) | Annually by January 31 |
| W-2 and W-3 | January 31 |
Full-service payroll providers handle these for you, but you are still responsible if a deposit is missed.
How to choose
- Check your state. Confirm the provider files state withholding and unemployment in your state.
- Match your accounting software. QuickBooks Payroll for QuickBooks Online, Wave Payroll for Wave. Gusto and OnPay connect to most tools.
- Look at the full monthly cost. Base fee plus per-person fee. For a solo owner, that is base plus one person.
- Confirm penalty protection. Some providers cover penalties caused by their own filing errors.
- Plan for growth. If you will hire, benefits and HR tools matter more.
Frequently asked questions
Can I run S-corp payroll myself without software?
Yes, but you must calculate withholding, deposit taxes on time and file Forms 941, 940, W-2 and state returns. Late deposits bring penalties, so most owners automate it.
How much salary should an S-corp owner take?
It must be reasonable for the work you do. Owners often look at pay for similar roles, time spent and company profit. A CPA can help set a defensible number.
Is payroll software deductible?
Yes. The S corporation deducts payroll service fees as a business expense.
Do I need payroll if I have an LLC taxed as a sole proprietor?
No. A single-member LLC taxed as a sole proprietorship pays you through owner draws, not payroll. See How to Pay Yourself as a Sole Proprietor.
This article is general information, not tax advice. Prices are approximate and change often. Consult a CPA or Enrolled Agent for your situation.
Related guides
- Best Tax Software for Self-Employed (2026)
- Best Business Bank Accounts for LLCs and Freelancers (2026)
- QuickBooks Self-Employed vs FreshBooks vs Wave (2026)
- Best Bookkeeping Services for Small Businesses (2026)
About this guide
Written by the Freelancer Tax HQ editorial team, based on our professional experience, official US government sources (IRS, SSA and other agencies) and reputable informational articles listed in the sources below. Last reviewed on . Tax rules change often, and we update this guide when they do. Read our editorial policy or report an error.
Sources
IRS: S corporation compensation and medical insurance issues; SSA: Contribution and benefit base; OnPay: Best payroll software picks 2026; Gusto: Best payroll services for one employee; Wave pricing. Example figures are FreelancerTaxHQ illustrations.
Official resources linked in this guide: IRS: Self-Employment Tax; IRS: Tax preparer credentials.