Husband and Wife Businesses: File as a Partnership or as a Qualified Joint Venture?

By Ron Cohen, CPA, MST
Partner
Greenstein, Rogoff, Olsen & Co., LLP

The attached article above reviews how husband and wife businesses may file for federal tax purposes. This seemingly simple issue is complex.

Filing a partnership return is estimated by the IRS to require 200 hours of tax return preparation time, so the ability to avoid that task is valuable.

In some circumstances, the income and deductions and all tax items can be split and reported as separate Form 1040, Schedule C businesses whereby the husband and wife separately report their share of income, deductions and other tax items, and separately report their share of Self-Employment income that flows to a separate Schedule SE for each. In that way, each spouse clearly pays the required amount of income tax and gets the required Social Security and Medicare credits (for purposes of computing future Social Security and Medicare benefits) for income earned each year.

In short, using two Schedule Cs is a whole lot easier than filing a separate Form 1065 Partnership return with two Schedule K-1s and flowing that into each partner’s Form 1040 (in the same Form 1040 if the partners are filing “jointly.”)

See the attached article and carefully evaluate the proper way to file.

Please call GROCO if you have any questions or comments at (510) 797 8661.