The S-Corp Election Deadline: What You Need to Know
If you're an LLC or sole proprietor, March 15 is the hard deadline to elect S-Corporation tax treatment for the current calendar tax year. Miss it and the election doesn't count until next year — which is potentially tens of thousands of dollars in self-employment tax savings deferred by twelve months.
Why S-Corp election matters
Under the default LLC/sole-prop classification, every dollar of profit is subject to 15.3% self-employment tax (Social Security + Medicare). With an S-Corp election, you split your business income into two parts:
- A reasonable salary to yourself (subject to payroll taxes).
- The remaining profit, which flows through as a distribution and is not subject to self-employment tax.
For an owner taking $150,000 in profits where a reasonable salary is $80,000, that means roughly $10,700 in annual self-employment tax savings — every year.
What "reasonable salary" actually means
The IRS requires that S-Corp owners pay themselves a salary that reflects the value of the work they perform. This is the most-litigated piece of an S-Corp election.
Reasonable salary is benchmarked against:
- Industry compensation data for similar roles (the BLS publishes this).
- Hours worked in each role.
- Geographic adjustment (a comparable role in Manhattan vs Missoula).
A defensible salary is documented in advance — not reverse-engineered at tax time.
The deadline mechanics
- March 15 is the deadline to file Form 2553 for an existing entity to be treated as an S-Corp for the current tax year.
- A new entity has 75 days from its formation date.
- Late elections can sometimes be cured under Rev. Proc. 2013-30 if reasonable cause is documented — but don't rely on it.
What to do before March 15
- Confirm S-Corp election is the right choice for your profit level. The break-even is generally $50K–$60K+ of net profit after a reasonable salary.
- Compute and document a defensible reasonable salary.
- File Form 2553 on time.
- Set up payroll for yourself (now you're an employee of your own company).
- Update your bookkeeping for owner draws vs. distributions.
If you're not sure whether the math works for you, our S-Corp calculator gives a quick estimate. For an actual filing review, reach out — March moves fast.