When spouses own a small business together you have 4 choices.
- Report the business as only owned by one spouse. File a schedule C in that person's name only. But, the other spouse will have no earned income, so you will not be eligible for certain tax benefits like the dependent care credit. And the other spouse will not accumulate credits in the social security system for disability or retirement. You can work around this by having the spouse who owns the business, pay the other spouse a salary, withhold and pay employment taxes, and issue a W-2. The salary is deducted as a business expense by one spouse and reported as income by the other spouse so it's pretty much a wash.
- Split the business. Report 2 schedule C's--one in each spouse's name, and split the income and expenses. Both spouses will have income and will pay self employment tax and build up social security credits. This can ONLY be done if you live in a Community Property State ... this is called a Qualified Joint Venture.
- File an S-corp return using Turbotax for Business (a different product than Home & Business). The business pays a salary to both spouses, and pays employment taxes and issues W-2s. Any remaining profits at the end of the year are distributed and reported on a K-1 form. The owners/spouses will file personal tax returns but will not include a schedule C.
4 . File a Partnership return also using the TT Business Program. There are no payroll obligations with a partnership as all income & expenses are passed thru to the partners.
Both options 3 & 4 require that you get an EIN and set the business up timely unfortunately it is too late to do so for the 2018 return.
Links for more information:
ttp://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Husband-and-Wife-Business
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Election-for-Husband-and-Wife-Unincor...
