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 broker's rate card. 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 prices Plans A and C and the employee-only / employee+spouse / employee+children tiers. Only the selected Plan B 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 premium, $26,400 becomes $24,912 | + $1,488 |
| 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.