Beginning inventory when establishing a qualified joint venture

[twpc]

I have been operating a retail business as a sole proprietor since 2017. I live in Texas and want to stablish a qualified joint venture so my wife will get credit for social security purposes. When I create the additional schedule C to split income and expenses, how do I handle beginning inventory. If I split the inventory the beginning inventory on my schedule C will not match the ending inventory from last year. Should I attach an explanation with my schedule C and if so is there a way to do that in TurboTax so that I can still file electronically?

A related question is would it serve the same purpose of getting social security credit for my wife if I just pay her a salary and give her a 1099 that she would claim as income?

[MaryK4 · Accepted solution]

Yes, in TurboTax, you can indicate that "I used different methods to value my inventory at the beginning and end of 2024"  The next screen will allow you to type an explanation and the beginning and ending amounts.

You also can hire her an an employee, but you would have to issue a W2 and have additional filing requirements (unemployment tax).  If you treated her as an independent contractor, you could issue her a 1099-NEC, but you would still have to report a Schedule C for her and there would be more scrutiny if you used this method.