Managing taxes for an LLC that contracts in multiple states - questions about registration and 1099 reporting

I recently set up a single member LLC that's now contracting with an agency that will be sending me to different states for consulting projects. Some of these assignments might have me working in another state for weeks or even months at a time. I'm purely providing consulting services (just my expertise/brainpower) and not selling any physical products. I'm trying to figure out the tax implications and have a few questions: 1. How would any specific state know what income my LLC earned while I was working there? From what I understand, only the agency that contracted with my LLC gets listed on the 1099, not the individual client businesses where I'll actually be performing the work. 2. Am I misunderstanding how this works? Will each individual client business actually be listed separately on different 1099s? 3. The big question: Does my LLC need to be registered as a foreign entity in every state where I end up doing consulting work? Or is there some threshold of time/income I need to hit before that's required? I'd really appreciate any insights from those who've navigated this multi-state LLC situation before! Tax season is coming up fast and I want to make sure I'm doing everything right.

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18 comments

Hattie Carson

•8M

So I've dealt with this exact situation for several years. Here's what you need to know: For your first question, states generally become aware of your income through a few mechanisms. The primary one is when you file a non-resident state tax return reporting income earned in that state. Most states require this when you've established "nexus" there - which brings me to your third question. Each state has different thresholds for when an LLC needs to register as a foreign entity. Some states use days worked (like 15+ days), others use income thresholds (like $5,000+), and some consider any business activity as establishing nexus. You'll need to check each state's specific requirements. Regarding the 1099 situation - typically, the agency that contracted with your LLC will issue you a single 1099-NEC for the total amount they paid you. The individual businesses where you physically perform services won't issue you 1099s directly if they're paying the agency, not you. Your contract is with the agency.

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Kendrick Webb

•8M

Thanks for the detailed response! This helps a lot. So just to clarify - if I'm only dealing with a single 1099-NEC from the agency, how exactly do I determine how much income to report to each state? Do I need to track the exact days I worked in each location and then calculate a percentage of my total income? Also, have you found any good resources for checking each state's specific nexus requirements? I'll potentially be working in 4-5 different states throughout the year.

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Hattie Carson

•8M

For determining income by state, you'll need to keep detailed records of days worked in each location. Many states use a "duty day" method where you calculate the percentage of working days spent in that state and apply that percentage to your total income from the contract. So if you worked 20 days in State A out of 100 total working days, you'd allocate 20% of that contract income to State A. The best resource I've found is the Federation of Tax Administrators website which has links to all state tax departments. Also, many of the major tax software providers have state-by-state guides on their websites. I personally use a spreadsheet where I track location by date and then calculate percentages at tax time.

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Destiny Bryant

•8M

I was in a similar situation last year and found that using https://taxr.ai really simplified things. The agency I contracted with gave me a single 1099, but I had to figure out the income allocation across 3 different states. I tracked my days worked in each state and taxr.ai helped analyze my situation and showed me exactly how to apportion the income correctly. They also helped me understand when I needed to register my LLC as a foreign entity in different states based on my specific activities. What impressed me was how they explained the concept of "economic nexus" versus "physical presence nexus" for my situation. Saved me from overpaying taxes in multiple states!

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Destiny Bryant

•8M

You can manually enter the work days or upload a CSV file if you track your work in a spreadsheet. They don't directly integrate with calendar apps yet, but I used the export feature from my Google Calendar and it worked pretty well after some formatting. I actually did run their recommendations by my accountant, and she was impressed with the accuracy. They stay updated on state law changes and even flagged a recent change to New York's telecommuter rules that my accountant wasn't aware of yet. The system references the specific state statutes and regulations they're using for their analysis.

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Dyllan Nantx

•8M

Just wanted to follow up and say I tried taxr.ai after seeing it mentioned here. Totally worth it! I was going back and forth between 4 states for different projects and was super confused about how to handle the tax situation. The system analyzed my situation and gave me a clear breakdown of which states I needed to file in and which ones I could skip based on their minimum thresholds. It also gave me documentation explaining the reasoning that I can keep with my tax records in case of an audit. Most helpful thing was their explanation of the LLC foreign qualification requirements versus tax filing requirements - turns out these are two different things! I learned I needed to file taxes in some states where I didn't actually need to register my LLC. Would've never figured that out on my own.

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Anna Xian

•8M

Multi-state tax filing can be a nightmare! After struggling to reach my state's department of revenue for weeks with questions about my LLC situation, I finally used https://claimyr.com to get through to an actual human at the tax department. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was dealing with similar issues - working in multiple states, unsure about filing requirements, and the standard phone number just kept disconnecting me after 45+ minutes on hold. Claimyr got me connected to a state tax specialist in about 20 minutes who confirmed exactly what my registration requirements were. I also used it to reach the IRS to clarify some questions about Schedule C allocations across states. Honestly would've given up otherwise.

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Anna Xian

•8M

It works by using automated technology to dial and navigate through the IRS phone system for you. Instead of you sitting on hold for hours, their system handles that part. When it finally reaches a human agent, you get a call connecting you directly to that agent. It basically does the waiting for you. I felt the same way initially, but it's not a scam. The service doesn't claim to create new availability at the IRS - it just handles the hold time so you don't have to waste hours of your day. I used it three times now for different tax questions and it saved me literally hours of frustration each time. The IRS phone tree is particularly brutal, and this bypasses all that nonsense.

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Rajan Walker

•8M

I need to apologize to Profile 9 and admit I was completely wrong about Claimyr. After my skeptical comment, I decided to try it myself since I've been trying to reach the IRS for weeks about an LLC multi-state filing issue. The service actually worked exactly as described. I got a call back connecting me to an IRS agent after about 35 minutes (which I didn't have to spend listening to hold music). The agent was able to clarify my specific questions about Schedule C allocations and foreign LLC registrations. They also confirmed that I only needed to worry about state registration in places where I exceed certain thresholds. For anyone dealing with complex state tax questions, being able to actually talk to a human at the tax agencies makes a huge difference. I stand corrected!

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Nadia Zaldivar

•8M

One thing nobody's mentioned yet - if you're physically present in another state performing services, you could also potentially be subject to local taxes too, not just state taxes. Cities like NYC, Philadelphia, and San Francisco have their own income taxes on top of state requirements. I found this out the hard way after consulting in Philadelphia for 3 months and getting hit with their city wage tax. Definitely check the local tax requirements for any cities you'll be working in!

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Nadia Zaldivar

•8M

Chicago doesn't have a city income tax like some other major cities, so you're safe there. You'll just need to deal with Illinois state income tax for the period you're working in Chicago. However, if your contract takes you to New York City, Philadelphia, San Francisco, or certain cities in Ohio or Michigan (among others), you'll need to account for local income taxes as well. It's definitely worth researching each location before you go. Some cities have very low thresholds - Philadelphia, for instance, starts taxing non-residents from day one of working there.

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