Married Filing Jointly + Spouse with Small Business

[Johlecaster]

Hello all,

My wife and I were just married in September and she started a small business and quit her full time job last year, and is currently a sole proprietor of the business. So this is our first year filing jointly, as well as our first year filing for her business. Can anyone advise how we do this? Which product would we use? Would the business side of it be separate, or does it all go into one filing? 

Anything dumbed down and step by step would be helpful for us, as we have no clue where to begin.

Thank you!

[LindaS5247]

You can file using TurboTax Home and Business.  You will file your Joint Form 1040 and a Schedule C for her business will be part of it.

TurboTax is pretty easy and straight forward to follow and enter your Schedule C business information.

IRS Schedule C, Profit or Loss from Business, is a tax form you file with your Form 1040 to report income and expenses for your business. The resulting profit or loss is typically considered self-employment income.

You'll need to file a Schedule C if you earn income through self-employment as a sole proprietor or as a single-member Limited Liability Company (LLC). 

Before you start gather all of your tax forms and the forms related to her business.  It's important to keep track of expenses for her business because you will be deducting them on her Schedule C.

For business expenses to be deductible, they need to be both “ordinary” and “necessary.” The IRS considers an expense to be ordinary if it is common and accepted in your industry. For an expense to be considered necessary for your business, it must be one that is helpful and appropriate for your trade or business. An expense doesn't have to be indispensable to be considered necessary.

What info is on a Schedule C?

Schedule C asks for several items related to your trade or business. Some of the items include:

• Business name and address
• Principal product, service, or profession offered by your business
• Accounting method used for your business (cash, accrual, or other)
• Whether or not you have materially participated in the business
• If you started or acquired the business during the current tax year
• Detailed reporting of your income
• Itemized reporting of your business expenses, including items like advertising, insurance, legal and professional services; rent or lease payments, repairs and maintenance expenses, utilities, wages, and more
• Information about cost of goods sold used in your business (if applicable)
• Details about vehicles used in your business (if applicable)
• Other expenses not easily categorized by the fields provided within the form

Click here for "What is a Schedule C?"

Click here for information on reporting self-employment income and deductions.

Click here for IRS instructions for Form Schedule C.

Click here for a description of Business Expenses, IRS Pub 535.

[Gordon9]

As to your filing, TurboTax will walk you through the process of entering information on status as well as information on each of you as individuals, and you will indicate that you are filing jointly. Be thorough and accurate with birth dates, Soc Sec numbers, and addresses.

As to your wife's business venture, if it is a basic small business (sole proprietorship) that she is running from home, she should keep those finances running through a separate bank account from which she can generate a profit and loss statement at the end of the year (basically detailing Income and Expenses netting to a profit or a loss). In a simple situation like this, she would report those numbers on Federal Form Schedule C and the bottom line income or loss would be then carried to your Federal Form 1040 for taxation along with your other income such as W-2 and interest, etc. Many small businesses are set up and run in this way and the requirements are very basic and informal. You will be able to use TurboTax Deluxe, TurboTax Premier, or TurboTax Home and Business to file your taxes.

On the other hand, if and when the business grows and becomes more significant, it could be set up as an LLC, S Corporation, or C Corporation using your State's guidelines. She should seek help from a CPA or other professional to help in this area. Basically, an S Corporation, and some of the LLC categories become  entities that file their own tax returns where the bottom line earnings are reported to her on a Form K-1. In other words, they report their Income, Expenses, Earnings on a separate tax return that pays no taxes itself, but which "passes through" those earnings to you via a Form K-1, which gets entered on Federal Form Schedule E, and gets carried to your Federal Form 1040 for taxation. For this type business, I would recommend using the TurboTax Business product, which is harder to find and not the same as TurboTax Home an Business.

If the company is set up as a C Corporation, which is very unlikely for a small business, it would file its own tax return and also pay taxes separately from your individual tax return. She could receive earnings from that C Corporation by way of a W-2 paying her a salary, or by way of dividend payments as a shareholder. She is likely not there yet and you need not worry about that. Again, in this situation, TurboTax Business is the product to use.

[m-koszu]

I have the download/desktop version of HOME and BUSINESS,  after I click begin, the only thing i can click is "begin your individual return"....     i am afraid i will begin and have no way of making it a joint return... 

any way to change that or do i need to follow through with a return of the product? 

[MayaD]

Under Personal Info enter your information and continue until you get to the screen Were You Married?

Select Married and continue to enter your spouse's information. 

 If you are married, you and your spouse can choose to file a joint return. If you file jointly, you both must include all your income, deductions, and credits on that return. You can file a joint return even if one of you had no income or deductions.

IRS.gov