USA OPS · CPA Verification Report
CPA Verification Report
Sole proprietor electing S-corporation through the PEO · California · tax year 2026 · married filing jointly
Every figure in this report comes from one of three sources
Read this report by source. The tax computation is neutral: it applies fixed tax law to two independent sets of variables it does not choose, the prospect's facts and the provider-side structure assumptions. Change either input and the result recomputes mechanically.
*The engine makes exactly two disclosed modeling choices, the reasonable-wage split and a conservative QBI treatment, called out where they occur. The California state-tax lines also carry two state-specific disclosures: the tax-year basis and the entity-level franchise tax.
What the client entered
What the broker configured
The broker's full card also shows other structure options and the household setups. Only the selected Selected structure family rate applies to this owner. The engine reads these rates as given. It does not set or adjust them.
Federal computation
Fixed 2026 federal tax law applied to Sources 1 and 2. Current Schedule C position vs the same owner as an S-corp inside the PEO. Each line cites its authority.
| Line | Sole prop current | S-corp via PEO | Authority |
|---|---|---|---|
| Net business profit P | $120,000 | $120,000 | Source 1 |
| Reasonable W-2 wage B | NA | $72,000 | 60% split, Source 2 |
| S-corp distribution | NA | $48,000 | IRC section 1366 |
| Self-employment tax | $16,955 | NA | IRC section 1401, section 1402(a) |
| FICA + Medicare on wage | NA | $11,016 | IRC section 3101(b), section 3111(b) |
| Self-employed health deduction P | $26,400 | $26,400 | IRC section 162(l)(2)(A); Notice 2008-1 |
| Section 199A QBI deduction | $10,584 | $0 | IRC section 199A; see note |
| Standard deduction, MFJ 2026 | $32,200 | $32,200 | Rev. Proc. 2025-32 section 4.14 |
| Federal taxable income | $42,338 | $55,580 | IRC section 63 |
| Federal income tax | $4,585 | $6,174 | IRC section 1(j); Rev. Proc. 2025-32 section 4.01 |
| Payroll + federal subtotal | $21,540 | $17,190 | SE/FICA + federal income tax |
California state computation
California starts from federal adjusted gross income, applies its own standard deduction and rate schedule, and does not recognize the federal section 199A QBI deduction.
| Line | Sole prop current | S-corp via PEO | Authority |
|---|---|---|---|
| California starting point, federal AGI | $85,122 | $87,780 | Sch CA (540), Part I; CA conforms to 1/2 SE-tax and section 162(l) |
| Less California standard deduction, MFJ | ($11,412) | ($11,412) | R&TC section 17073.5; FTB 2025 Form 540 |
| Section 199A QBI not recognized by California | $0 | $0 | CA has never conformed to IRC section 199A |
| California taxable income | $73,710 | $76,368 | FTB Form 540, line 19 |
| Tax per Schedule Y, MFJ | $1,676 | $1,783 | R&TC section 17041; FTB 2025 Schedule Y |
| Less personal exemption credit, 2 x $153 | ($306) | ($306) | R&TC section 17054; FTB Form 540, line 32 |
| California personal income tax | $1,370 | $1,477 | FTB Form 540, line 64 |
| California S-corp franchise tax, $800 minimum | NA | $800 | R&TC section 23802(b), section 23153; 1.5% of net income, $800 minimum |
| Total tax, payroll + federal + California personal + CA franchise | $22,910 | $19,467 |
Annual reconciliation
| Payroll tax saving, SE tax $16,955 becomes S-corp FICA $11,016 | + $5,939 |
| Federal income tax, higher under S-corp | - $1,589 |
| California personal income tax, $1,370 vs $1,477 | - $107 |
| California S-corp franchise tax, $800 minimum | - $800 |
| Net income, payroll, and state tax saving | + $3,443 |
| Group vs individual current cost, removed from public site | removed from public site |
| PEO administrative fee, 1.5% of $120,000 | - $1,800 |
| Net annual benefit to the owner | + $3,131 |
For reference, the same profile in a no-income-tax state like Texas nets +$4,038. The $907 difference is California's $800 S-corp franchise tax plus the $107 personal-tax differential.