What's the difference between Schedule C and S-corp for 1099 income?

These are not really competing options at the same level. Schedule C is what you file by default if you do nothing. It is part of your personal Form 1040, lists your business income and expenses, and produces a single net profit number that flows to your individual tax return. The S-corp election sits on top of an underlying entity (an LLC or corporation) and changes how its income is taxed. The election is made by filing Form 2553 with the IRS, typically by March 15 of the tax year you want it to take effect. The underlying business does not change. The tax treatment does.

The largest practical difference is self-employment tax. As a Schedule C filer, you owe 15.3% SE tax on 92.35% of your net profit, covering both sides of Social Security and Medicare. On $150K net profit, that is roughly $21,200 before any income tax. As an S-corp owner, you pay yourself a reasonable W-2 salary (typically 35% to 50% of profit for a service business) and the remaining profit flows out as distributions. You owe FICA only on the salary, not the distributions. At $150K profit with a $60K reasonable salary, your FICA load is roughly $9,200 instead of $21,200 in SE tax.

The S-corp savings come with overhead. You file a separate 1120-S corporate return ($1,500 to $2,500 per year), run formal payroll for your W-2 salary ($600 to $1,200 per year for a service like Gusto), and absorb modestly more bookkeeping complexity. State franchise or filing fees add $0 to $800 depending on the state. Total annual S-corp overhead lands at $2,000 to $3,000 for most service businesses. Net annual savings at $150K profit: $8,000 to $11,000 after overhead. That recurs every year you stay above the threshold.

Compensation flows differently. On Schedule C, all the money is owner's draw. There is no salary. You take what you need, leave what you do not, and the bank distinguishes between them in name only. On an S-corp, you must pay yourself a documented W-2 salary that is reasonable for the work you perform, run actual payroll with tax withholding, and treat anything you take above that salary as a distribution. The IRS does not let you take $0 salary and 100% distributions to dodge FICA. A defensible salary methodology, documented before you set the number, is what makes the election audit-proof.

Filing complexity differs by an order of magnitude. A Schedule C filer files one tax return per year, the personal 1040, with Schedule C and Schedule SE attached. An S-corp owner files two returns: the 1120-S for the business (due March 15) and the personal 1040 (due April 15) that includes the K-1 from the S-corp. Plus quarterly payroll returns (Form 941), annual payroll returns (Form 940), W-2 and W-3 for the salary, and state-equivalent filings. None of this is hard with the right setup, but it is structurally more involved.

The breakeven is roughly $60K to $80K in sustained net profit. Below that, S-corp overhead can outweigh the SE tax savings. Above $100K, the math almost always favors the election. Above $200K, the savings often exceed $13,000 per year. The decision is not whether the S-corp is better; at meaningful 1099 income it nearly always is. The decision is whether your profit is consistent enough that the year-over-year savings justify the year-over-year overhead.