Either way, paying via a 1099-MISC or having your spouse include their respective income/expenses on a Schedule C, the result would probably be the same. To follow-up on the comments from @MaryK1101, you would have more paperwork to handle if you issued your spouse a 1099-MISC. We assume your spouse would take the position that they are self-employed and that the work performed was done in connection with the spouse's trade or business. If your spouse were to take the position that they were not self-employed, and that their bookkeeping was not consistent enough to be a trade or business, then whether you spouse received a 1099-MISC or not, they would still report their income on their return but would not complete a Schedule C. Moreover, the spouse would pay income tax on their income but not self-employment tax.
If you decide to treat your spouse as an employee, you will have more work to do, such as, among other things, withholding and remitting the applicable taxes. Thus, you probably want to avoid the employer/employee relationship. Here is some information about qualified joint ventures which applies to married persons in business together.
Under the IRC, a qualified joint venture conducted by a married couple who file a joint return is not treated as a partnership for Federal tax purposes. All items of income, gain, loss, deduction and credit are divided between the spouses following in accordance with their respective interests in the venture. Each spouse considers his or her respective share of these items as a sole proprietor. Thus, it is anticipated that each spouse would account for his or her respective share on the appropriate form, such as Schedule C. For purposes of figuring out net earnings from self-employment, each spouse’s share of income or loss from a qualified joint venture is taken into account just as it is for Federal income tax purposes under the provision (for example, in accordance with their respective interests in the venture).
More information about married couples in business can be found here:
Married Couples in Business
@GG-88
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