What State Do I file my taxes in?

[Looney1966]

I have a business in TX(Single member LLC) and reside there. I travel in various states for consulting work.  Do I need to file a tax return in each state that I do consulting, or do I file just my TX Franchise tax and my 1040 claiming all income on that return?

[rjs]

You have to pay tax to each state that you work in, on the money that you earn for work that you do in that state. Every state has different filing requirements, but you probably have to file a nonresident tax return in every state you work in. In many cases the requirement to file a state tax return is based on your total income, even though you only have to pay tax on the money that you earn in that state.

[Looney1966]

Even though it all is paid to my LLC EIN number?  Do I split that up based on where I was when I earned it?  Also, I forgot I changed my LLC to a S Corp at the beginning of 2022.  Does that make a difference?

[rjs]

Yes, you have to split up your income for state taxes based on where you were when you earned it.

And yes, changing your business to an S corp makes a huge difference. Unlike a single-member LLC, an S corp is a separate legal entity. The S corp has to file its own tax return, Form 1120-S, separate from your personal Form 1040 tax return. Part of the S corp's tax return will be a Schedule K-1 containing information that you have to enter in your personal tax return. And the S corp has to pay you a reasonable salary, as an employee, for the work that you do for it. If you have not been doing that, you need to go to a local tax professional ASAP to straighten it out before the end of the year (which means in the next four weeks).

Various states may have special rules for an out-of-state S corp that is operating in the state. The tax professional that you consult should be able to help you with that, too.

[Looney1966]

Turbo Tax is the software I am using.  I am taking a salary from my S Corp, I just forgot at the beginning of 2022 it switched from s single member LLC to S Corp.  I consult content creators all over the USA and am in different states doing that.  My LLC was formed in Texas and I asked the IRS to be taxed as an S Corp as of 1/1/22.  I live in TX as well but travel doing this work.  I was just trying to get a head start on my taxes for 2022 and see if I needed to separate my income based on where I was consulting or since they pay the S Corp directly if I just file it all under that in the state of TX or have to do that in various states.

[rjs]

You still have to separate your income based on the states that you worked in. For your personal income, it doesn't matter whether you are paid by the S corp or directly by the client. The amount you earn for the work you do in each state is income from that state. Funneling it through the S corp does not change that. Where you do the work determines where the income is taxed.

The S corp also is conducting business in each state that you work in, so it has income from each state, even though it's established in Texas. I'm far from an expert on S corps, but I'm pretty sure that the S corp has to file in each state that you worked in.

Working or doing business in multiple states creates a complicated tax situation. I again recommend that you engage a tax professional to guide you through it. You need someone who has experience with multi-state taxation of individuals and businesses.