Business & farm

The issue is an unfortunately complex one and very dependent on your state of residency.

From what you say, may I assume that you live in one of these states: AZ, CA, ID, LA, NV, NM, TX, WA, & WI - meaning you live in a community property state. 

If that is correct, then your CPA is correct as to the IRS disregarding the fact  of the LLC - that is they consider it to be a Single Member LLC [SMLLC] in community property states when the two partners are a married couple.

If this is your situation, then each of you, in your one joint Form 1040 with status MFJ, file a Schedule C and each file  Schedule SE. He erred in submitting a single Schedule C and should have allocated the income and expense between the two.  He essentially took a short-cut.  I suspect that ultimately it would be acceptable to the IRS even though it is not compliant.  The IRS would be most interested in the fact of the two SE's which is necessary.

I've posted the supporting information below for someone in your case - assuming you do indeed live in a community property state.

SIMPLE ANSWER FOR THOSE LIVING IN A COMMUNITY PROPERTY STATE: 

AZ, CA, ID, LA, NV, NM, TX, WA, & WI

Joint Ownership of LLC by Spouse in Community Property States - 

Rev. Proc. 2002-69 [http://www.irs.gov/pub/irs-drop/rp-02-69.pdf] addressed the issue of classification for an entity that is solely owned by husband and wife as community property under laws of a state, a foreign country or possession of the United States.

If there is a qualified entity owned by a husband and wife as community property owners, and they treat the entity as a:

• Disregarded entity for federal tax purposes, the Internal Revenue Service will accept the position that the entity is disregarded for federal tax purposes.
• Partnership for federal tax purposes, the Internal Revenue Service will accept the position that the entity is partnership for federal tax purposes.

A change in the reporting position will be treated for federal tax purposes as a conversion of the entity.

A business entity is a qualified entity if

1. The business entity is wholly owned by a husband and wife as community property under the laws of a state, a foreign country, or possession of the United States;
2. No person other than one or both spouses would be considered an owner for federal tax purposes; and
3. The business entity is not treated as a corporation under IRC §310.7701-2.

Note: If an LLC is owned by husband and wife in a non-community property state, the LLC should file as a partnership. LLCs owned by a husband and wife are not eligible to be “qualified joint ventures” (which can elect not be treated as partnerships) because they are state law entities. For more information see Election for Husband and Wife Unincorporated Businesses.[2013: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Election-for-Husband-and-Wife-Unincor...]