de minimis safe harbor for 2 Schedule C businesses

[bruce93]

Preparing 1040 for TY2023, joint return, each of us has a separate Schedule C business.  Last year (TY2022), each of us made separate "de minimis" elections for our separate Sch C businesses (using TaxAct), and the software generated separate election statements.  With TurboTax Home&Business (desktop download, Win 10, latest update 10/1/24) for TY2023, it only generates one "joint" election statement (with just my SSN), and includes no business names or Sch C reference(s) on the statement.  Is there a way to generate separate ones (that also indicate the business it's for, with the appropriate owner's SSN)?  Have the regulations changed regarding this?

[tagteam]

The program may be hard-coded for only one election statement, which is probably not critical if you're filing a joint return.

[bruce93]

Thanks for your quick reply.  My understanding of the de minimis statement rules is that it must list the name, address, and Tax ID of the business.  Thus, it would seem that separate statements would be required.  Is that correct?

[tagteam]

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@bruce93 wrote:

....Thus, it would seem that separate statements would be required.  Is that correct?

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Yes, I believe you are technically correct since that would be in accordance with the Regulations.

However, with TurboTax, you might have to generate an additional election form and print and mail your return as I'm not sure the program is capable of generating two separate election statements on its own.

[bruce93]

For historical reference, I used TurboTax in 2021, still MFJ, but just one Sch C business (for my wife ("Spouse")).  In that case, the software generated a de minimis election statement with her name and dba, and her SSN.  Not exactly apples-to-apples, but this is different program behavior (at least for using her individual name and dba).

[bruce93]

Thanks for your clarification.  I had to really hunt to find the de minimis statement questions (never found a tick box in forms mode, had to go through the depreciation Q&A and answer "Yes" to having depreciable property to get into the right series of questions).  If you're correct about the program having that limitation, do you know if there's a way to add a user-written statement (actually 2 in my case) to a return (for e-filing)?

[tagteam]

The program, as I recall, will generate just one election statement but that statement will have the names of both joint filers on it. Whether that's sufficient is not exactly clear.

[bruce93]

Thanks for your response.  I found that I could edit the name field in that form (I found it under Forms using a search for "de minimis"), so I did that for my name and dba, since my SSN was on that pre-generated form.  You were right that the program would not let me add a second copy of that form, so I saw that I could add a blank form, and did that, typing the whole thing in for my wife's business.  That second one says "Blank Form" at the top which is rather stupid IMO, and has an unused Total line at the bottom, but if it will let me e-file, I'll give it a go.

[tagteam]

Sounds as if you have this handled.

I don't think the blank form will prevent you from e-filing but I think there's a question as to whether that form will be included in the e-file package (hopefully it will).

[bruce93]

Well, I thought I had this figured out, but then a TurboTax rep (for program help) told me that the standard/default TurboTax-generated de minimis safe harbor election covers the entire tax return (i.e. covers both of our Schedule C businesses).  The name field on the election form contains my name '&' spouse name, and the Tax ID field has [only] my SSN (the first one on the 1040--a typical IRS usage).

I've never heard of a "joint" election for this anywhere else, and can't find any similar rule in any of the IRS pubs/links.  Can anyone provide a reference to an IRS document/Regs or some official guidance that shows how to properly make the election(s) for 2 separate Schedule C businesses on a joint 1040?

[tagteam]

I really don't think this is a problem or will present an issue for you, in particular, or the IRS.

The reason being is that you are both making the election while each filing a separate Schedule C; both of your names are on the election statement and you're filing a joint return.

The question could arise here in the event one of you wanted to make the election and the other did not. However, that would appear to be handled by simply capitalizing the asset(s) on one Schedule C while expensing them on the other.

I don't believe there is any guidance for this scenario. I will page @AmeliesUncle to see if he has any input.

[bruce93]

Thanks for your explanation.  You're probably right, but I'd welcome the second opinion you suggested as well.

[AmeliesUncle · Accepted solution]

In my opinion, TurboTax does it wrong.  While it does not need the business name or EIN, it should have both of your Social Security Numbers on it.

But I agree with Tagteam that the IRS probably won't really care as long as both names are on it.

If only one person wants to make the election, I edit it so it only has one name on it and their SSN number.

To explain why I think TurboTax is wrong:  The Regulation says that for a consolidated corporate return (one "parent" tax return that covers several "member" corporations), the election needs to state the name AND identification number of each "member" corporation.  To me, that means you can't only use the 'first' Social Security Number on your Joint tax return - It should have the Social Security Number of all 'members' of the tax return.

[tagteam · Accepted solution]

I think may have discovered a workaround (albeit somewhat crude).

You can alter the name box in Forms Mode and include both SSNs in that box (see screenshot). 

@bruce93 

[bruce93]

Thanks to both of you, TagTeam and AmeliesUncle!  I marked both you for the best answer.  I appreciate your help on this!