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mdcowan
Level 2

Allocating W-2G's to a Schedule C

My wife I decided to go professional as gamblers. We create more income from gambling that our other two businesses.  When gambling, any amount you win in excess os $1,200 creates a W-2G.  Since we call the business one name, I filed only one Schedule C.  Obviously, we both received many W-2Gs.  QUESTION:  Can I report the winnings from both of our W-2Gs in the one Schedule C?

5 Replies
Opus 17
Level 15

Allocating W-2G's to a Schedule C

If this is a joint venture, you have two options.

1. Treat it as a "qualified joint venture."  You file two schedule Cs, one in the name of each spouse, each reporting half the income and half the expenses.  The IRS may likely send (automated) mismatch letters if the income doesn't match the W-2Gs.  In that case you would respond to the letters with a letter of your own and spreadsheets or other documents that prove you properly reported all the income, just not in the way the IRS computer expected. 

2. Treat it as a partnership.  You file a 1065 partnership return that reports all the income and expenses of the partnership, and issues a k-1 statement to each partner which is filed as part of the partner's 1040 tax return (or in your case, your married filing joint return would have a k-1 for each spouse, along with any W-2s, dependents, and personal deductions or credits.). If you go the partnership route, you need to create an EIN for the partnership and report your winnings under that number. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Critter-3
Level 15

Allocating W-2G's to a Schedule C

Since we call the business one name, I filed only one Schedule C.   Obviously, we both received many W-2Gs.  QUESTION:  Can I report the winnings from both of our W-2Gs in the one Schedule C?   

 

NO   ... if "WE" have "A"  business then you have set up a partnership and a partnership return needs to be filed.  If you live in a community property state then you could have a Qualified Joint Venture.   Seek local professional guidance to get this done correctly.   Penalties for failing to file a form 1065 are $205 per partner per month starting last March. 

Opus 17
Level 15

Allocating W-2G's to a Schedule C


@Critter-3 wrote:

Since we call the business one name, I filed only one Schedule C.   Obviously, we both received many W-2Gs.  QUESTION:  Can I report the winnings from both of our W-2Gs in the one Schedule C?   

 

NO   ... if "WE" have "A"  business then you have set up a partnership and a partnership return needs to be filed.  If you live in a community property state then you could have a Qualified Joint Venture.   Seek local professional guidance to get this done correctly.   Penalties for failing to file a form 1065 are $205 per partner per month starting last March. 


As long as the partnership is not incorporated or registered as an LLC, they do not have to be in a community property state to file as a qualified joint venture.  

https://www.irs.gov/businesses/small-businesses-self-employed/election-for-married-couples-unincorpo...

 

 

However, if the business were to be registered as an LLC, then they must file a 1065 unless they are in a community property state, in which case they file 2 schedule Cs as a "qualified entity."

https://www.irs.gov/pub/irs-drop/rp-02-69.pdf

 

And it is definitely true that the 1065 (if needed) is due March 15 of the tax year, not April or later, and the late penalties are substantial. 

 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
mdcowan
Level 2

Allocating W-2G's to a Schedule C

Thanks

mdcowan
Level 2

Allocating W-2G's to a Schedule C

Thanks.

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