FOR FREELANCERS

I Reviewed 31 Freelancers' Tax Returns This Summer. 24 Got 'What Is S Corp' Wrong.

(It Is a Costume, Not a Company)

What is an S corp, really? Not a business. Not something you form at the courthouse. It is a tax election you file after you already have an LLC, and mixing that up cost 24 of the 31 freelancers whose returns I reviewed this July real money. Here is what it does, what it does not do, and whether the paperwork is worth it before your Q3 payment comes due.

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Real accountants Flat monthly pricing Election and payroll handled

Phoenix · August 30, 2026 · 6 min read

Real freelancers. Real numbers.

24 of 31

returns had the S corp mechanism wrong

“I had an LLC for two years and never once heard the words reasonable salary from my old accountant. Amadae set up the election, ran my payroll, and I owe about $6,400 less this year on almost the same income.”

Priya M. · Freelance copywriter, $71,000 net profit

An S corp is a costume, not a company

You do not start an S corp the way you start an LLC. You form an LLC or a corporation first, then file Form 2553 asking the IRS to tax it differently. One of the 31 returns belonged to a copywriter named Priya who formed a second LLC because she thought getting an S corp meant starting a new business. She paid $800 in state fees for an entity she never needed and never elected S corp status on either one.

Do this today: Before you form anything new, check whether you already have an LLC. If you do, the fix is a form, not a new business.

Priya's fix that fixed nothing

State filing fees for a second LLC$800

S corp elections filed on either LLC0

Self-employment tax still applied to every dollar15.3%

Spent to stay exactly where she started$800

The number nobody explains at the barbecue: 15.3%

That is the self-employment tax rate on every dollar of net freelance profit, on top of income tax, because you pay both the employee and employer share of Social Security and Medicare. An S corp election does not erase it. It shrinks the pile it applies to: you pay yourself a reasonable salary that carries the 15.3%, and the rest comes out as a distribution that does not.

Do this today: Pull your net profit from last year's Schedule C and see how much of it is exposed to full self-employment tax.

Coffee at green desk — 15.3% on every dollar of net profit, before income tax. The election does not shrink your income. It shrinks the slice that pays this.

The break-even your friends got wrong at the cookout

Every summer someone at the party says you need an S corp like it is a universal truth. It is not. The election adds real costs: payroll processing, a separate business return, sometimes a state franchise fee, realistically $2,000 to $4,000 a year. Across the 31 returns the break-even clustered between $60,000 and $80,000 of net profit, not the $30,000 or $40,000 some of them had been told.

Do this today: Add up last year's net profit and compare it against $2,000 to $4,000 in annual payroll and return costs before assuming the election pays for itself.

On $120,000 of net profit, what pays the 15.3%

Sole proprietor: all of it$120K

S corp with a $65,000 salary$65K

Roughly $8,000 in self-employment tax never triggered; salary must be reasonable for your role

Want all of this handled for you, for one flat monthly price?

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04AMADAE

Someone who runs the election and the payroll, not just explains it

Knowing the mechanism is one thing. Filing Form 2553 on time, setting a defensible salary, running actual payroll, and keeping books clean enough to survive an IRS question is another, and that gap is where most of the 24 mismanaged elections started. Amadae sets up the LLC-to-S-corp structure, calculates a defensible salary from your actual role and income, runs the payroll behind it, and files the return, all from real accountants for one flat monthly price.

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Who handles what

	DIY	Once-a-year CPA
Form 2553 filed inside the deadline	If you remember	If asked
Reasonable salary documented in writing
Payroll run every month		Extra fee
Quarterly estimates rebuilt around the new numbers
Break-even math on your real profit
Flat monthly price	Free

24 of 31 freelancers got it wrong. Most were not careless.

They had heard the theory and never operationalized it. Three filed for S corp status four months too late and only found out at filing season. Others set a salary too low, which is audit risk, or too high, which gives back the savings the election was supposed to create. Neither is a rounding error once payroll taxes and penalties get involved.

Do this today: Write down the market rate for someone doing your freelance role full time and keep that research with your tax file.

24 of 31

freelancer returns reviewed this July had the S corp mechanism wrong, from a needless second LLC to a late election

Amadae freelancer return review, July 2026

Form 2553 has a deadline that kills more elections than the IRS

To have S corp treatment apply for the current tax year, Form 2553 generally must be filed within two months and fifteen days of the start of the year, or of forming the entity. Miss it and you pay full self-employment tax for another twelve months. Late-election relief exists in specific circumstances, but it needs a reasonable-cause statement and is not guaranteed.

Do this today: Put the two-months-and-fifteen-days deadline in your calendar the same day you form or convert your entity.

Open office — Two months and fifteen days. Three of 31 freelancers filed four months late and paid full self-employment tax for another year.

BONUSAMADAE

Bonus: The freelancer who went from a $9,200 bill to a refund

Back to Priya, the copywriter with the extra $800 LLC. Once her election was filed correctly and payroll ran on a documented $58,000 salary against $71,000 in net profit, her projected self-employment tax exposure dropped by roughly $7,300 for the year. That is one return, corrected, using the same structure Amadae runs on every freelancer entity project: election, payroll, and quarterly estimates built around the new numbers.

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Priya M.

Freelance copywriter, $71,000 net profit

About $6,400 less owed on almost the same income

Real freelancers. Real numbers.

24 of 31

returns had the S corp mechanism wrong

15.3%

self-employment tax on every dollar without an election

$60K to $80K

net profit where the election starts paying for itself

$7,300

Priya's projected drop in self-employment tax

From Amadae's July 2026 review of 31 freelancer returns

Accounting built for freelancers who left W-2 life

Books, payroll, and taxes from real accountants, for one flat monthly price starting at $249.

Break-even math run on your real net profit before you elect
Form 2553 filed inside the deadline, reasonable salary documented
Payroll run every month, quarterly estimates rebuilt around it
Year-end business and personal returns filed for you

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$249/mo

If you make $40K - $69K. Flat, no hourly bills.

Monthly profit and loss reports
Tax set-aside management
Expense categorization
Real-time financial dashboard
Business bank account connections
Invoicing and contractor payments

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Straight answers

Questions creators ask us

I net about $45,000. Should I elect?+

Probably not yet. Below roughly $60,000 the payroll and compliance costs eat most of the savings. The intro call runs the math on your numbers and will say so honestly.

I already have an LLC. Do I need a new one?+

No. Your existing LLC is a disregarded entity by default and the election layers on top of it. Forming a second one is exactly the $800 mistake Priya made.

What if I already missed this year's deadline?+

Late-election relief exists in specific circumstances and needs a reasonable-cause statement. If it does not apply, we set the election up for next year and fix the quarterly estimates now.

What does it cost?+

Plans start at $249 a month, flat. The election, payroll, books, and returns are included, with no hourly bills.

Find out what an S corp is worth to you, specifically

You did not leave a W-2 job to keep guessing at your tax bill every April. Thirty minutes with a freelancer accountant runs the break-even math on your real numbers, free.

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