Question on Schedule SE, married-filing jointly, and the SSA work credits.

[prdfy]

Married filing jointly
Self-employed
Sole Proprietor
Only one spouse has 1099s, (1099-K, 1099-MISC)

First question - To pass along the correct information to Social Securtity for work credits based on income, a Schecule SE AND Schedule C is needed for BOTH tax filers? -- Correct?

Secondly - If Yes, will Turbo Tax generate a Schedule SE AND Schedule C, automatically, for BOTH individuals when filing jointly as a self-employed sole proprietor?

Also, does it matter if the person paying the tax is the one without any 1099s?  In other words, the wife receives the income and 1099s are in her name only, but the husband is the one paying the tax to the IRS.  Does that matter as far as those work credits are concerned?  For those applying to both husband and wife?

Thank you to anyone who reads and answers  ))

[Vanessa A]

What does the other spouse have?  Income from self-employment?  W2 income?  No income?

does it matter if the person paying the tax is the one without any 1099s? If you are married filing jointly, basically, your liabilities are coming out of the same pot on your tax return, so there is no difference in who pays the actual tax.  

Now for Social Security, if both of you are self-employed in different businesses, you should have 2 Schedule C's.  You would enter your income on your Schedule C and her income on her Schedule C.  This will report your individual income to your individual SSA accounts.

To get TurboTax to do two separate schedule C's you will enter the income and expenses for the first person, then when done, you will select Add a Business and enter the income and expenses for the second person. 

 (HOWEVER, if you are partners in a business, then you would need to file a partnership return 1065 instead of a Schedule C and then enter your individual K-1's, unless you are in a community property state) 

If she is the only one that is self-employed, then she is the only one that should have a Schedule C.  Your name would not be on it. 

Basically, your incomes are separately reported, but your payments on a joint return are all coming out of the same numbers.  One persons payments will offset the other persons liabilities and vice versa. 

[prdfy]

Hi Vanessa,

Thank you for the reply.

You asked what the other spouse has for income.  The breakdown for the income is

Husband - No income, no 1099s or any passive income.

Wife - Receiving 1099-K and 1099-Misc

No business partnership.  Just filing jointly as sole proprietor.

My question on the Schedule SE - Will that be generated automatically by TurboTax with the name of the person on the 1099s?  (wife).  Or who is listed as primary on the tax return?  (husband)  or would Schedule SE have both?

And for the social security work credits, will those apply to only the person who received the income or to both since it is a joint return and they are essentially both paying those self-employment taxes?

Thanks again for the reply on my question.

[VolvoGirl]

Right.  You assign Schedule C to the right person.  It is for one person.  The self employment tax will only be for that person.  Only that person will get the Social Security credit.  

[prdfy]

Just to amend my question ..

I guess what I'm asking is this .. Specifically related to TurboTax in this situation for Self-Employed income.

Is there a dialog in TurboTax that asks for the income proportion between filers when filing jointly as self-employed?  And if yes, will TurboTax "Automatically", generate two Schedule Cs and two Schedule SE when filing jointly as self-employed? 

So that the Social Security and Medicare taxes can be proportioned equally between Husband and wife and both would get the SSA work credits.

Hope that helps to better define my question.

[CatinaT1 · Accepted solution]

Yes. If both spouses are self-employed in their own businesses, there are two separate Schedule C's and two separate Schedule SE's. This is why when entering the business information into TurboTax, it asks whose business it is.

You don't specifically state this, but in case your situation is that you both work in the same self-employed business and are not a partnership, I am including an article about Qualified Joint Venture, which is when spouses are both owners of the same self-employed business.

I hope this answers your question.

What is a Qualified Joint Venture?

[prdfy]

Yes, that answers it.  Thank you!  Qualified Joint Venture is what we need then.

Only question now is how to do that in TurboTax?   I don't see any way of entering this to achieve that.

Only one spouse receives the 1099s, (1099-K and 1099-Misc).  So how would this be entered into Turbo tax so it is a 50/50 split for the income when there is only one spouse with 1099s?

With the end goal of both spouses getting the work credits for their SSA accounts.

[CatinaT1 · Accepted solution]

This won't happen automatically; you will have to file two separate Schedule C's.

Each spouse reports his or her share of the business income and expenses (50/50, 75/25, etc). As you enter the business, you will be asked to Tell Us About your Business. You will do this process twice, once for each spouse. 

On the information for the spouse that received the 1099's, you will enter the full amount of the 1099's, but that spouse will have an expense you will enter on the screen that says Enter Business Expenses Not Yet Reported. Here you will enter the description of - QJV Spouse portion of Income received on 1099.  The amount will be whatever percentage you decide. So if it's 50/50, you will enter half the amount of the 1099's.

For the spouse that did not receive the 1099's, you will say No to any questions asking if you received a form. You will enter your half of the 1099 income under Income or Sales for your Schedule C.

[prdfy]

Hi CatinaT1,

Thank you so much for the clear instructions for this issue regarding a Qualified Joint Venture.  Why this isn't part of the TurboTax process makes no sense to me at all.  They really should add this as an interview topic and automate the entry of this process

Thank you again.