Estimate only — not a tax position.
The figure below is computed from the values you entered, simplified assumptions, and the federal tax rates in effect as of 2026-07-16. It is not tax advice and does not create a CPA-client relationship. It does not capture facts specific to your return. Do not act on this number, file based on it, or include it in a tax position without a licensed tax professional reviewing your full situation. ProAxis Tax & Accounting Services makes no warranty as to accuracy and accepts no liability for reliance on this output. See full Disclaimer and Terms of Service.
Want a CPA to review this estimate? ProAxis checks the numbers against your full situation in a free consultation — or work with an NJ S-Corp CPA on the election, payroll, and Form 1120-S end to end.
Worked Example — $150,000 NJ Sole Proprietor
A NJ sole proprietor running a single-member LLC nets $150,000 in annual business profit. The owner is considering whether to elect S-Corporation status. Here's how the calculator breaks down the math:
Without S-Corp election (current LLC): All $150,000 of net profit is subject to self-employment tax. Using 2026 rates: 12.4% Social Security on the first $184,500 wage base + 2.9% Medicare on all earnings, with the 92.35% Schedule SE adjustment. SE tax owed: approximately $21,194 per year.
With S-Corp election: Owner takes a reasonable W-2 salary of $75,000 (50% of net — supportable for most service businesses based on industry comparables). Payroll tax on $75,000: approximately $11,475. Remaining $75,000 of profit passes through as a distribution NOT subject to self-employment tax. Gross savings: $21,194 − $11,475 = $9,719/year.
Net of S-Corp compliance costs: Subtract the estimated $2,000/year in additional compliance (payroll setup, quarterly Form 941 + NJ-927 filings, separate Form 1120-S preparation, reasonable comp documentation). Net annual savings: approximately $7,700/year.
Plus the BAIT election layer: Once the S-Corp election is made, the owner becomes eligible for the NJ BAIT election. At this $150K profile the entity-level BAIT is roughly $4,000-$8,500 depending on how much of the income is distributive proceeds, so the federal benefit is on the order of $1,000-$2,000 a year — and smaller still if your SALT already fits under the 2026 federal cap of $40,400 (phasing down above $505,000 of modified AGI, never below $10,000, per IRC 164(b)(7) as added by OBBBA sec. 70120). Estimate only; results vary. ProAxis runs the BAIT numbers against your full return before recommending the election.
After You Run the Calculator
The calculator output is a starting point, not a decision. Here's what to do with the result:
- If the calculator shows under $3,000/year in net savings: The S-Corp election usually isn't worth the compliance complexity. Stay as an LLC and revisit annually as income grows.
- If the calculator shows $3,000-$8,000/year in net savings: Borderline. The election makes sense if you're committed to operating cleanly with payroll, quarterly filings, and reasonable comp documentation. Worth a conversation with a CPA.
- If the calculator shows $8,000+/year in net savings: The election almost certainly makes sense. Add the NJ BAIT election analysis on top. It can add federal savings for owners whose state and local tax exceeds the 2026 SALT cap of $40,400. The amount varies with income and entity type. Schedule a CPA consultation to validate the analysis and execute the Form 2553 filing.
Whatever the result, document the inputs you used. When you talk to a CPA, you'll want to confirm whether your "reasonable salary" estimate is defensible based on industry comparables and IRS guidance. A CPA's job is partly to validate the math you've already started.
