Here is a quick breakdown of the cost of hiring yourself as an employee of your own s corporation.
Running Payroll – Employment Taxes for S Corporations
The employer (that’s you if you are an owner/employee of your own s corporation) portion of payroll taxes is 7.65%. This includes the Social Security and Medicare Taxes in which the employee must pay on behalf of the employee.
The employee (also you as an s corporation owner/employee) must also pay the other half. This is added to your tax deposits.
These taxes are not really much different that the taxes you would pay as a sole proprietor or as a partnership. They are just paid through the payroll tax system when you are an s corporation owner who provides more than minimal services for the business.
There is also state unemployment tax (now called “unemployment insurance” in modern days because it sounds better). This tax typically ranges from 1% to 5%, depending on the situation.
Federal unemployment tax is another liability, but if you pay state unemployment tax, it’s not one to consider as the amount is negligible. The amount you owe is based on how much you already paid at the state level, and it’s generally very small if you are paying to the state.
Running S Corporation Payroll – Processing Fees
To run payroll, you must hire a service that will:
- Compute the payroll for you
- Deposit taxes on a frequent basis
- File payroll tax returns (there are many of them and they are due at different times)
- Keep track of the payroll bookkeeping
The cost for this can be as little at $50/month or so if you do this yourself. Be careful hat you may see offers to start for less, but typically after a while the discounted price reverts to the “normal” price. You also have to pay extra per employee or per paycheck with most online services. That’s how nearly all online payroll companies tend to operate. I don’t recommend do-it-yourself payroll because I’ve seen the mess in payroll tax mistakes that this can make – and the super expensive costs to fix them.
If you hire a “mom and pop” accountant to handle all of this for you, you will pay anywhere form $150 to $250 per month, depending on the deal you get and how many employees you plan to hire.
Finally, you can get a service that actually hires the employees on your behalf. These seem to be cheap at first but when you read the fine print they can cost $200-$500 per month.