We have Husband and Wife run LLC (Home based Business). After filling all questions and data, when I see on the forms that are filled, I see that Schedule C (Sole proprietorship) and single K-1 filled, which does not look good to me. How do I correct this and file 2 K-1 for both husband and wife? Do I need Schedule C?
BTW, I live in WA state, which is Community Property State
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So, as you are a resident of Washington State, you live in a state with "Community Property Laws" This is important specifically when a married couple [and only a married couple] are the two partners [and only two partners] in an LLC.
Summary Answer to your specific question
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DETAILED & COMPLEX & GENERAL Answer RE: LLC's & Married Couples as dual owners
- for the general case and for anyone else reading this answer about LLC's owned by a married couple.
This answer is only appropriate to the case where an LLC is co-owned by a married couple residing in one of the nine states with Community Property laws.
Please see below why it is that both spouses may file Schedule C and Schedule SE if the entity is organized as an LLC but because only two partners exist and the two partners are a married couple and the residence is in a Community property state and the couple chooses to file not as a Partnership (Form 1065) but as Sole Proprietors.
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As of 2007, any married couple living in a community property state who own, jointly and participate jointly an LLC may still consider the LLC to be a "disregarded entity" - called an SMLLC (single member llc), and each then can avoid filing a Form 1065 or other return and simply file, each, a Schedule C and SChedule SE to their joint or separate Form 1040s. For authorization, please read the citation incorporated below.
Who is eligible to file as dual Sole Proprietors and not require filing a Form 1065?
>>>>>>Married taxpayers who are domiciled in one of the following community property states:
Note that you allocate the income and deductions between the two Schedules C (and the resulting SE) according to some logical method. This way both spouses achieve their individual Social Security paid quarters status [and of course pay SE taxes!] 😉 - since FICA and Medicare goes to the individual credit and not the married couple as a couple.
BUSINESS product is not needed!
Any personal product will do - buy ANY version of personal product, preferably the DESKTOP - - and you can choose any version - although the basic is too basic for most - all versions produce the same forms - if unfamiliar with Schedule C, may be best to pay the additional cost of H&B
Can a husband and wife run a business as a sole proprietor or do they need to be a partnership?
It is possible for either the husband or the wife to be the owner of the sole proprietor business. When only one spouse is the owner, the other spouse can work in the business as an employee. If a married couple who file a joint tax return elect to conduct their business activities as a qualified joint venture, (a trade or business entity in which the husband and wife materially participate in such venture - see citation above as this is allowable for Federal taxation purposes only in Community Property states), the spouses must divide the items of income, gain, loss, deduction, credit and expenses in accordance with their respective interests in such venture. This is effective for taxable years beginning after December 31, 2006.
Unfortunately, the TurboTax Online is an impediment to accomplishing what you want to do, that is to make your own decisions on how to allocate income and expense between the various Schedules C necessary for you to file.
As was stated in the earlier answer: "income and expenses allocated between each of you [possibly just dividing monetary entry in half, for example] " You need to allocate the amounts of income and expense between the various Schedules C. So how to do that?
Almost none, if indeed any, of the "superuser" volunteers here use the online themselves, but instead obtain the Desktop software. The installed on your computer software has many advantages but one of the strongest arguments for it is the ability to easily switch back and forth between the interview and "Forms Mode" where the latter gives you direct access to the forms as they are created and filled in. In Forms Mode you can go to a field such as a given expense on the Schedule C and by right clicking (or CTL-I) create a supporting accounting sheet for that field where you can, and you must do it for each Schedule C, an allocation of the specific income or expense data item. It may be tedious but it accomplishes what you want. Be very careful to prepare before doing this by having an accounting of the total of each dollar amount to be allocated (for example, build one Schedule C alone with everything and then as stated about the accounting supplement, by negative entry allocate out pieces of each $ amount) and enter that allocated amount in the relevant Schedule C.
IF you want to take this on, since it will not cost you more because instead of paying for the online service filings you can buy the software at discount now (such as at Costco - discount until beginning of March, or BJ's or Amazon) for a roughly equivalent amount.
Here is the information on how to switch => https://ttlc.intuit.com/questions/1901476-how-do-i-switch-from-turbotax-online-to-the-turbotax-softw...
If you are not in a community property state, you should have received 2- k-1's for the LLC. If you used TurboTax business, you will need to go back and correct that in there. The LLC would file a 1065 and issue a K-1 to each of you. You should not have a Schedule C if you are entering a K-1 from your LLC.
If you are in a community property state, then you would not have a K-1, you would just have two Schedule C's where all income would be reported.
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