I made a little calculator that shows you the tax savings you can expect:
https://www.petekeen.net/how-much-can-you-save-with-an-s-corp
S-Corp makes sense if you can justify paying yourself $118,500 or less in "reasonable salary" or if you are making more than $250k. It does two things. First, it means you only pay Social Security and Medicare on your salary. Social Security currently only applies to the first $118,500 of income, however, so between that and $250k only Medicare (2.9%) applies.
At $250k (for MFJ filers) the additional Obamacare Medicare surtax kicks in, which is another 0.9% on top of the 2.9%. The second interesting thing about an S-Corp is that distributions aren't subject to this additional Medicare tax.
Really this is a question for a CPA, who will be able to look at your numbers and tell you if it makes sense in terms of the tax savings offsetting the additional tax prep work. My CPA charges a minimum $750 to prep an S-corp return, so the tax savings have to justify that. As well, a CPA will help you determine what your reasonable salary could defensively be. The IRS has a bunch of guidelines and you want to be able to point to them and say you meet one or more if you ever get audited. You'll have to work with them to balance tax savings against 401k contributions because you can only contribute 25% of your salary +$18k as an S-Corp owner up to the $53k cap, whereas if you're filing as a disregarded entity (sole prop or default LLC) you can contribute 20% of net income + $18k up to the cap.
Prostache has given some very good advice (I highlighted the important highlights IMHO).
In addition to the extra tax prep fees for the S-Corp, you will also pay unemployment tax on yourself to the IRS and possibly to your state. You will probably pay a payroll service or your CPA to file all the quarterly payroll tax forms on your behalf. All in, I'd plan on around $1K/yr in extra compliance costs (tax returns and payroll tax returns) plus the unemployment taxes (again, amount would depend on your specific state).
Also as stated by prostache, you will need to weigh how the "lower" salary restricts your ability to max out the solo 401(k).
A huge factor to "reasonable salary" is your profession. For some professions, anything under the FICA cap would be stretching it. For others, you might realistically be able to defend $40K of salary. Location matters as well. A software engineer in the Bay Area would obviously be expected to earn more than one in Cleveland, Ohio. I didn't read any of your previous posts so I'm not sure what your craft is.
The best approach to the reasonable salary question is this:
If I were to hire someone to perform ALL of my work duties, how much would I have to pay them? That is a reasonable salary...
I'm a CPA with clients in your exact scenario, so I'd be happy to answer any basic questions you have (not going to provide specific tax advice). Honestly a forum isn't the best place for tax advice. Ha ha.
