Here is what moving into a PEO would mean for you.
You would be ahead by roughly $3,400 to $4,900 a year, about $350 a month, after the admin fee.
Modeled net advantage across your plausible incomeahead
break-evenyour income+$4,900
How the number is built
Tax-structure savings+Health-cost difference=Net position
Plan shown: Balanced. The toggle previews how plan tier shifts the health-cost side. Non-functional in this sample.
Your current structure vs inside a PEO
Dollars only, line by line. Built from your inputs and Acme Brokers' actual rate card.
Line
Today
Inside a PEO
Federal income tax
$21,650
$20,100
State income tax (AZ)
$3,180
$2,940
Self-employment / payroll tax
$13,370
$12,560
Section 199A (QBI) deduction
-$4,800
-$5,200
Total tax
$33,400
$30,400
Health plan cost (annual)
$12,000
$12,900
PEO admin fee
none
$3,300
Net annual position
+$3,400 to $4,900
For your accountant / personal tax detail
Projected 2026 net income$120,000
Reasonable W-2 wage (split)$72,000
Distribution$48,000
Health plan, pre-tax treatmentapplied
Owner health deduction positionflagged, see notes
Why you have not done this already
A solo or small-team owner usually cannot reach this tax structure and this level of group coverage on their own. The PEO is the access. That is the part of the picture that is hard to see until someone runs your actual numbers, which is what this report does.
Your team of 5, the employer side
What the business pays for group coverage today versus inside the PEO.
Group plan, employer share (annual)
$42,000
$44,500
Coverage tier available
limited
broader options
Employer cost difference
+$2,500
The business often pays a bit more here for materially broader coverage options. This is not a claim of employee-cost savings. Confirm the specific plans on the call.
What you stop carrying
Operational load the PEO absorbs. A conservative estimate, shown separately from the dollars-only comparison above.
Payroll processing
$80 to $150 / mo
HR and compliance
$400 to $1,000 / mo
Workers' comp admin
$25 to $75 / mo
Estimated ranges, vary by business. Not included in the net figure above.
The income-sensitivity range
break-evenyour incomehigher income
Your current health plan cost is the biggest driver, so income changes move the result less than you would expect. The advantage stays stable across a wide income band. The range here is income variance. Plan choice is the separate toggle above.
When the dollars are close
The other reasons owners move.
Coverage quality
If your current plan is a limited HMO, the PEO's group options may be a meaningful upgrade. Confirm on the call.
Time and cost back
Less time and money on payroll, HR, compliance, and workers' comp admin.
Add family later
The option to add a spouse or family under group terms.
Income growth
Expected 5 to 10 percent growth shifts the band further ahead within a year.
Pre-tax treatment
Premiums you pay after-tax today can be treated pre-tax inside the structure.
The wage structure inside a PEO changes how much you can route into a 401(k) and how the employer side is handled. For an owner planning to increase contributions, this can be as large as the tax line. Your broker can model your target on the call.
Arizona note
Arizona conforms to the federal treatment used here, with a flat state rate applied in the table. State-specific handling is confirmed against current Arizona rules and flagged in the notes below.
Assumptions and traceability
What your accountant should verify.
1.Inputs: $120,000 projected net income, $1,000/mo current health cost, S-corp single filer, Arizona, 5 enrolling employees, Balanced plan.
2.Reasonable-compensation wage split set at $72,000 W-2. Adjust to your facts.
3.The owner health deduction under section 162(l) is a contested position. The conservative treatment is applied here; the opposing IRS position is noted, your accountant should confirm.
4.State conformity: Arizona flat-rate treatment, current to enacted law.
5.Section 199A (QBI) computed on the post-split figures.
This shows the financial impact from what you provided. Sometimes it is clearly positive, sometimes close or slightly negative on dollars alone. Many owners still move forward for better coverage and reduced operational load. The final decision belongs in a conversation with your broker.
Next steps
A short discovery call fills in what this report leaves open.
Your exact plan options, your employees' coverage needs, and how the PEO would run inside your business. The report answers the general questions; the call answers the situational ones.
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Estimate based on the information provided. Not tax or legal advice. Sample render with illustrative figures.