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Level 1

Married couple sole proprietors income split 50/50

We are married couple working as sole proprietors filling jointly. What turbotax software we should use if we want to split our income  50/50, even the most income (1099-MISC) is received by one of us? How can we do that? We are not LLC. We want to pay equal self employment tax/social security.

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Employee Tax Expert

Married couple sole proprietors income split 50/50

Because you are a married couple and both materially participate in the business you are eligible to treat your business as a Qualified Joint Venture (QJV).

 

A qualified joint venture is a joint venture that conducts a trade or business where: 

  • The only members of the joint venture are a married couple who file a joint return;
  • Both spouses materially participate in the trade or business; and
  • Both spouses elect not to be treated as a partnership. 

You will each need to create two separate sole proprietorships on your return. You will  then split your business income and expenses between the two businesses according to ownership percentages or by participation percentages.

 

The IRS has not issued any guidance on how to split the 1099-Misc when there is qualified joint venture when a 1099-Misc received is only in one of he spouse's name.

 

To avoid the IRS being unable to match the 1099-Misc to their records:

  1. The entire amount should be reported as income under the Social Security Number on the 1099-Misc and entered as a 1099-Misc
  2. That spouse then would then enter, as an expense, in the Miscellaneous Expense section the amount of the 1099-MIsc Income based on the other spouse's percentage. The description on the entry would be "QJV income to spouse"
  3. The other spouse would enter this amount as Other self-employment income.
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Highlighted
Employee Tax Expert

Married couple sole proprietors income split 50/50

Because you are a married couple and both materially participate in the business you are eligible to treat your business as a Qualified Joint Venture (QJV).

 

A qualified joint venture is a joint venture that conducts a trade or business where: 

  • The only members of the joint venture are a married couple who file a joint return;
  • Both spouses materially participate in the trade or business; and
  • Both spouses elect not to be treated as a partnership. 

You will each need to create two separate sole proprietorships on your return. You will  then split your business income and expenses between the two businesses according to ownership percentages or by participation percentages.

 

The IRS has not issued any guidance on how to split the 1099-Misc when there is qualified joint venture when a 1099-Misc received is only in one of he spouse's name.

 

To avoid the IRS being unable to match the 1099-Misc to their records:

  1. The entire amount should be reported as income under the Social Security Number on the 1099-Misc and entered as a 1099-Misc
  2. That spouse then would then enter, as an expense, in the Miscellaneous Expense section the amount of the 1099-MIsc Income based on the other spouse's percentage. The description on the entry would be "QJV income to spouse"
  3. The other spouse would enter this amount as Other self-employment income.
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Level 15

Married couple sole proprietors income split 50/50

Just to clarify, a sole proprietorship can only have one owner. Period. End of Story. There are no exceptions. So if you both own the business, it is not in any way, form or fashion a sole proprietorship. At best, it is a qualified joint venture (QJV) where each of you treat your "share" of the business as a completely physically separate sole proprietorship. That means that each of you will file your own physically separate SCH C that is a physical part of your joint 1040 tax return. You split everything 50/50 right down the middle.

Otherwise, what you have is a partnership that will file it's own physically separate 1065 partnership return.

 

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Level 1

Married couple sole proprietors income split 50/50

We will go with Qualified joint venture (QJV). Question is which Turbo Tax software allow to do QJV and 50/50 split, so we don't have to file manually. Thank you

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Employee Tax Expert

Married couple sole proprietors income split 50/50

Just a little more info on Qualified Joint Ventures:

 

Definition of a Qualified Joint Venture

 

A qualified joint venture is a joint venture that conducts a trade or business where (1) the only members of the joint venture are a married couple who file a joint return, (2) both spouses materially participate in the trade or business, and (3) both spouses elect not to be treated as a partnership.

 

A qualified joint venture, for purposes of this provision, includes only businesses that are owned and operated by spouses as co-owners, and not in the name of a state law entity (including a limited partnership or limited liability company) (See below). Note also that mere joint ownership of property that is not a trade or business does not qualify for the election. The spouses must share the items of income, gain, loss, deduction, and credit in accordance with each spouse's interest in the business.

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