How to Run Payroll for an S-Corp With One Employee (Yourself)

As an active S-corporation (S-corp) owner-employee, you pay yourself a reasonable salary through payroll as an employee. That means withholding state and federal income tax and employee FICA from your paycheck, paying the employer payroll taxes your S-corp owes, depositing taxes on the required schedule, and filing payroll tax returns.

On a $60,000 reasonable salary, that costs your business approximately $64,632 a year: $60,000 in wages, $4,590 in employer Social Security and Medicare, and a minimum of $42 in federal unemployment tax.

With SurePayroll By Paychex, single-owner S-corps and small teams run payroll from setup through quarterly filings and year-end forms.

Your S-corp payroll starts with three numbers: salary, pay frequency, and state

Set your salary, check whether your state sets pay frequency requirements, then decide how often you pay yourself.

Your reasonable salary is a decision you make before you start running payroll, weighing what comparable roles pay against what your business can support.

Pay frequency rules vary by state and worker category, so confirm your state's requirements before you set your payroll schedule.

You'll also need an EIN and a state tax account before your first run.

If you haven't registered as an employer yet, S-corp payroll setup, start to finish covers every step before this one.

What your S-corp withholds from your paycheck: federal and state income tax and your FICA share

You withhold three amounts from your $5,000 paycheck: federal income tax, state income tax where your state requires it, and your FICA share. All three come out of the IRS required reasonable salary you already determined.

How you complete Form W-4 for your own company determines your federal income tax withholding rate. Your state sets its own withholding rules. Some states do not require state income tax withholding on wages, while others do.

FICA funds two federal programs, Social Security and Medicare, and it applies at a combined 15.3% of wages. You pay half as the employee and your S-corp pays the other half as the employer.

Over 12 pay periods your S-corp withholds $4,590 in employee FICA from your wages.

Social Security and Medicare have different wage limits. Social Security tax applies only up to the annual wage base, while Medicare tax applies to all covered wages.

Once your wages pass $200,000 you withhold an Additional Medicare Tax of 0.9%, and your business owes no matching share on it.

You enter your salary once as a pay item, and SurePayroll calculates the withholding on every run. Built for S-corp owner-employees paying themselves a W-2 salary.

What your S-corp owes as the employer: the FICA match, FUTA, and state unemployment insurance

The taxes withheld from your paycheck are employee taxes. Your S-corp must deposit those withheld amounts and also pay separate employer payroll taxes from business funds.

Your S-corp matches your employee FICA exactly: 6.2% for Social Security and 1.45% for Medicare, or $382.50 a month on a $5,000 salary. That comes to $4,590 for the year.

Federal unemployment tax (FUTA) and state unemployment insurance (SUI) are employer-only. In most states, you don't withhold either from a paycheck.

Your S-corp may be eligible for a 5.4% credit by paying SUI in full and on time on the same wages. The full FUTA credit generally depends on timely SUI payments. Employers in FUTA credit reduction states receive a smaller credit.

State unemployment insurance requirements vary. Check your state workforce agency to determine whether your S-corp must register for SUI and how owner wages are treated.

"SurePayroll helped me set up payroll for my S-corp. My specialist was very prompt, patient, courteous, and professional. She walked me through processing my first payroll payment and setting up automatic payroll. Looking forward to taking this off of my plate as a single parent and business owner who wears too many hats." — Jennifer H., Better Business Bureau review

At a $60,000 reasonable salary, here's approximately what a full year costs your business.

Your wages are subject to payroll tax, not self-employment tax

Your S-corp election puts your pay on payroll. You draw a W-2 salary subject to payroll tax, split between you and your business. A sole proprietor pays self-employment tax on business profit instead.

Distributions are separate from payroll. They do not replace reasonable compensation, are not reported as wages, and are not subject to employee withholding or employer payroll taxes.

The employer share of FICA is a deductible business expense

Your S-corp deducts the employer portion of Social Security and Medicare, which lowers the taxable income that passes through to you. Your CPA can confirm how it applies to your return.

File Form 941 each quarter and Form 940 at year end

You file Form 941 four times a year and Form 940 once. Form 941 reports the federal income tax you withheld, your employee share of Social Security and Medicare, and the matching share your S-corp paid.

For 2026 you file Form 941 by April 30, July 31, October 31, and February 2, 2027. Deposit every tax in full and on time during a quarter and you get until the 10th day of the second month after it ends.

Your deposit schedule and your filing deadline are two different clocks

You deposit payroll taxes during the quarter. You file Form 941 after the quarter closes to report what you already deposited.

The IRS assigns your deposit schedule from your lookback period, the 12-month window it reviews each year to set your schedule for the next one. Employment taxes of $50,000 or less in that window put you on the monthly schedule, and new employers start there by default.

On a monthly schedule you deposit by the 15th of the month after you pay yourself, so January payroll is due February 15. When your total Form 941 liability for a quarter stays under $2,500, you can remit it with the return instead of depositing during the quarter.

Form 944 is an IRS assignment, not an election

The IRS assigns Form 944 filing status to eligible employers and notifies them in writing when annual filing applies. Eligibility runs to an annual liability of $1,000 or less across Social Security, Medicare, and withheld federal income tax, which sits well below what a reasonable salary generates.

If you believe your business qualifies for Form 944, contact the IRS before changing your filing status. File Form 944 without that notice and your four Form 941 returns go unfiled, with a penalty on each.

Your year-end payroll filings include Form W-2, Form W-3, and Form 940

You produce a Form W-2 reporting your wages and withholding, and file it with the Social Security Administration under a Form W-3 summary. Form 940 reports your FUTA for the year.

Your W-2 reports wages, your Schedule K-1 reports your share of profit

You produce two documents covering two kinds of income. Your W-2 reports the salary you paid through payroll. Your Schedule K-1 reports your share of what the corporation earned after expenses, and your S-corp files Form 1120-S to report that profit.

Distributions carry no employee withholding and no employer payroll taxes, because they do not process through payroll.

According to the National Small Business Association 2024 Small Business Taxation Survey, 46% of small businesses that use payroll software spend less than one hour per month on payroll tax administration.

Your health insurance premiums are W-2 wages, not a distribution

You report your own health insurance premiums as wages on your W-2, in Box 1 only. As the sole owner you hold every share, which makes you a more-than-2% shareholder, and that changes how your coverage runs through payroll.

A regular employee excludes employer-paid premiums from income entirely. You don't. You run them through payroll in three steps.

1. Your corporation pays or reimburses the premiums, and deducts the cost as a business expense. Pay them personally without reimbursing through the corporation and you can lose that deduction.
2. You add the premiums to Box 1 of your W-2, which makes them federal income tax wages. When the required conditions are met, you leave them out of Box 3 and Box 5, so they do not become Social Security or Medicare wages.
3. You deduct them on your personal return. The self-employed health insurance deduction sits above the line, so it lowers your adjusted gross income whether or not you itemize.

The result is pre-tax coverage: the premium enters your taxable wages, and the personal deduction takes it back out. Followed this way, the premium is included in Box 1 wages and may support the personal self-employed health insurance deduction.

Premiums recorded in Box 3 or Box 5 create Social Security and Medicare tax that was never owed, and premiums left out of Box 1 disallow the personal deduction.

In SurePayroll, you can set up shareholder health insurance as a pay item, and the premiums carry through to your W-2 at year end.

The more-than-2% shareholder rules reach several other benefits, including employer HSA contributions and group-term life insurance. Your CPA or benefits advisor can tell you which of yours are affected.

Your W-2 salary, not your distributions, generally drives your retirement plan contribution limits

IRS retirement plan rules generally base owner-employee contribution limits on W-2 compensation, not on S-corp distributions. The salary you run through payroll can therefore affect how much your business may contribute to a Solo 401(k) SEP IRA, or another retirement plan.

Current IRS limits and your plan rules both apply, and your plan administrator or CPA can confirm where your salary leaves you.

Run your S-corp payroll yourself or with payroll software

Your payroll repeats on a fixed cadence: 12 pay runs, 12 deposits, four quarterly returns, and a year-end close, every year.

SurePayroll calculates payroll taxes on each run, files your federal, state, and local payroll taxes, and generates your W-2 at year end.

See plans and pricing.