Spouse and I co-own and operate an unincorporated LLC as community property in a community property state and treat the business as a disregarded entity (so it can go on our joint return).
The Instructions for Schedule C (under "Community Income," here) says if this is the case "you can treat your wholly owned, unincorporated business as a sole proprietorship, instead of a partnership... Report your income and deductions as follows...
If only one spouse participates in the business, all of the income from that business is the self-employment earnings of the spouse who carried on the business.
If both spouses participate, the income and deductions are allocated to the spouses based on their distributive shares."
...It goes on with bullets if it's a partnership or Qualified Joint Venture (QJV), but neither of those are applicable for a disregarded entity that is a LLC.
So how do I allocate the income and deductions of our LLC based on our 50 / 50 shares on our joint tax return?
Do we complete a single Schedule C in one of our names or two Schedule Cs (one for each of us, with the income and expenses split on them)? (Or is either way accepted by the IRS?)
Do we complete a single Schedule SE or two Schedule SEs (with income from the business split on them)?
The IRS indicates that a single Schedule C should be filed in one of the spouses name's (and doesn't say how to treat the Schedule SEs if both spouses participate in the business, which I need to know), but TurboTax 2020 Home & Business says to "split all of your business income and expenses according to ownership percentages" and file a Schedule C and SE for each spouse.
What is correct?
