The cost stack at a glance
| Cost | Set by | 2026 figure or basis |
|---|---|---|
| Minimum corporate excise | Massachusetts DOR (M.G.L. c.63 §39) | $456 per year, for every S corporation |
| Non-income measure of the excise | Massachusetts DOR | $2.60 per $1,000 of taxable Massachusetts tangible property or taxable net worth; you pay at least the $456 minimum |
| Entity-level income measure | Massachusetts DOR (c.63 §32D) | None below $6 million of total receipts; 2.00% of net income from $6 million to under $9 million; 3.00% at $9 million or more |
| Annual report | Secretary of the Commonwealth | Due each year; check the current fee and due date on sec.state.ma.us |
| PFML on the owner's W-2 wages | Department of Family and Medical Leave | 0.88% of eligible wages; employers with fewer than 25 covered individuals send 0.46%; 2027 rate not yet set |
| State unemployment insurance | Department of Unemployment Assistance | If your wages are covered: 2.42% for a new employer on the first $15,000 per employee; confirm coverage with DUA |
| Federal unemployment tax (FUTA) | IRS | Applies to the first $7,000 of each employee's wages; check the current rate and credit on the Form 940 instructions |
| FICA on the salary | IRS | 15.3% of salary in total, half from the business and half withheld from you; Social Security part capped at $184,500 |
| Payroll provider | Your choice | Varies by provider and plan |
| Extra return preparation | Your preparer | Form 1120-S, K-1, Form 355S, Schedule S and SK-1, on top of your personal returns |
| Bookkeeping upgrade | Your bookkeeper or you | Payroll entries, distributions, reimbursements and balance sheet reconciliations each month |
The Massachusetts corporate excise
Once a business is an S corporation federally, it is an S corporation for Massachusetts purposes too, and it files Form 355S with Schedule S and an SK-1 for each shareholder, electronically. The return is due on the 15th day of the third month after year end, with an automatic 6-month extension if payment requirements are met.
For a small owner-run S corporation, the excise is usually the greater of the non-income measure and the $456 minimum. The minimum applies to every S corporation, not only large ones, and it is due whether or not the business made money. The income-based excise at the entity level only starts when total receipts reach $6 million, and total receipts are measured before cost of goods sold, so a high-volume, low-margin business can reach that band sooner than its profit suggests.
Massachusetts requires estimated excise payments only when the excise is reasonably expected to exceed $1,000, so an S corporation paying the minimum does not normally need them.
Payroll-related costs in Massachusetts
Paying yourself a W-2 salary brings state payroll obligations that a sole proprietor does not have. The Department of Family and Medical Leave says that if you own a business and pay yourself through a W-2, you are an employee of that business and part of its covered PFML workforce. The exception is a business co-owned by family members, where the wages of a spouse, minor child or parent are excluded.
For 2025 and 2026 the PFML rate is 0.88% of eligible wages, capped at the Social Security wage base. Employers with fewer than 25 covered individuals are not required to pay the employer share of the medical leave contribution, so they send 0.46%, which can be withheld from the covered individual's wages. The 2027 rate had not been set when this page was checked; the Department sets it annually. Chapter 101 of the Acts of 2026 also changes how contributions are split between family and medical leave, which DFML says takes effect on 1 January 2027.
Whether an owner-officer's wages are covered for state unemployment insurance is worth confirming directly with the Department of Unemployment Assistance. If they are, a new employer's 2026 rate is 2.42% (6.08% in construction) on the first $15,000 of each employee's wages. DUA's exemptions include people working for a spouse and children under 18 working for a parent.
Illustrative: the fixed state costs for a $60,000 salary
Round numbers, tax year 2026, one owner-employee, fewer than 25 covered individuals, a new employer for UI purposes. This is an example of the arithmetic, not a quote.
| Item | Calculation | Amount |
|---|---|---|
| Minimum excise | Fixed | $456 |
| PFML | 0.46% × $60,000 | $276 |
| UI, if DUA treats the wages as covered | 2.42% × $15,000 | $363 |
| Total of these three | $1,095 |
Not included: federal unemployment tax, the annual report fee, payroll provider fees, return preparation and bookkeeping. Those are real and belong in any comparison with your own figures.
The costs that depend on who you hire
Payroll provider fees, return preparation and bookkeeping are the costs that vary most, and they recur every year. It is worth getting them in writing before deciding, because they can decide the answer for an owner whose employment tax saving is modest.
Bookkeeping usually has to tighten after an election. Owner wages, payroll tax liabilities, distributions and any reimbursements under an accountable plan each need their own accounts, and the balance sheet has to reconcile because it goes on the return. Books that were fine for a Schedule C often need more care for an 1120-S.
- Ask a payroll provider for its full annual cost for one owner-employee, including year-end forms
- Ask your preparer for the cost of the 1120-S and 355S in addition to your personal returns
- Ask whoever keeps your books what changes monthly, and what that costs
- Budget time: payroll runs, reviewing filings, and a salary review each year
Costs people forget
- The minimum excise in a year the business loses money
- Late filing penalties on Form 1120-S: $255 per shareholder per month for 2025 returns, and $260 for returns required to be filed in 2027, up to 12 months
- Catching up payroll if the election took effect before payroll started
- Cleaning up personal expenses paid by the company, which may have to be treated as distributions or wages
- The time and cost of undoing the election if it turns out not to suit you
Where we come in
We can lay out this cost stack with your actual figures and set it against the employment tax saved, so you can see whether the numbers work before anything is filed. We can run the comparison with your actual numbers, including the QBI effect that the cost list above does not show. We give you a scope and a price in writing before anything starts.
Figures on this page were checked against the IRS and Massachusetts sources listed alongside on 28 Sep 2026. They change — confirm the current amount before relying on one.
General information for owner-led businesses, not advice for your specific situation. Tax and accounting rules change, and how they apply depends on facts particular to your business. Talk to us — or to another qualified professional — before acting on anything here.
