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Level 2
posted Mar 14, 2024 3:46:07 AM

Unique Tax Situation for S-corp Formed in Texas but Living in Two States

I formed a single-member LLC (taxed as an S-corp) in Texas for online technical consulting. I lived in Florida temporarily for 6 months to work at a client's office and then moved back to Texas, where I have a permanent home.

  1. Should I run payroll in Texas, or should I run payroll in Florida for the months I was traveling there? What is better for tax deductions?
  2. If I run payroll in Texas, can I claim per diem expenses while in Florida, such as rent and meal expenses, as they would be considered travel expenses?
  3. If I can deduct my rent in Florida, does the lease need to be in my LLC's name, or can it be in my personal name? We rented an apartment for 6 months.
  4. I bought a car that I use solely for work. Considering I get the same deduction for the standard mileage rate versus actual expenses, is it better to choose one over the other (e.g., less scrutiny or proof needed for the IRS)?

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1 Replies
Expert Alumni
Mar 14, 2024 4:51:14 PM

The payroll should be reported in Texas, as that is where the company is located and where you work full-time. That may be better for payroll tax purposes as you would probably pay more for state unemployment taxes when registering a new business in Florida, as there wouldn't be any favorable history of unemployment claims to reduce your unemployment tax rate. Neither state has a personal state income tax so that wouldn't be a factor.

 

You may be able to deduct travel expenses since you are away from your tax home overnight but for less than a year. You would have to justify why it was necessary to rent the apartment, why you couldn't do the job from Texas in this case. Also, the lodging could not be too lavish or be used for primarily personal purposes. For instance, you can't take an extended vacation and just do a little bit of work and claim it was a business trip.

 

Technically, the lease should be in the name of the LLC. You may be able to get around that by issuing expense reimbursement reports showing the lease expense if the apartment was in your personal name.

 

I don't think it would make any difference from an IRS scrutiny standpoint to choose a mileage deduction versus deducting actual business vehicle expenses.