AnonymousFamilyBusiness
New Member

Trouble Splitting Married Business Income due to 1099-MISC

My wife and I own a side therapy business that generates income two separate ways: Seeing clients under our own company name and also seeing clients as a contractor under another person's larger, more established business. We have an LLC and we know that is a disregarded entity as we are wholly owned by the two of us.

 

TurboTax is telling us on our Schedule C we should split the profits and losses 50/50 and make two separate businesses. (Community Property State) But, a majority of our income is from a 1099-MISC and we can't split that in two. 

 

If I don't claim the 1099-MISC, I can happily split the profits and losses 50/50 where it all works out in the end. But then I'm not claiming a 1099-MISC, which the IRS is looking for me to claim it. How do I tell the IRS-'Hey we are owning up to our 1099-MISC income without attaching the 1099-MISC? It can't be cut into two.' I know that not claiming a 1099-MISC is a red flag for audits, and I just don't want to wait until the auditor shows up, ruins our lives for a few months as we show the 1099-MISC was split in two under the business's profits.

 

Thanks

KrisD15
Expert Alumni

Business & farm

You have two choices.

1. Enter the 1099-MISC on one Schedule C and report 50% as contract labor. Enter that 50% as income on the other Schedule C

2. Enter the 1099-MISC as if it were two separate forms. Split the box amounts in half and enter one into each Schedule C. 

The reason you're filing two Schedule C's is not because you are in a community property state, it's so your individual Social Security Accounts are each funded. 

The only time you need to worry about splitting income when living in a community property state is when you are filing Married Filing Separately. 

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AnonymousFamilyBusiness
New Member

Business & farm

Thank you for your advice, I really appreciate it.