Self employed

[MccTax 2023]

Hi

My wife and I have a family business.  I was the primary taxpayer for a long time, and I paid Social Security and Medicare taxes.  My wife has no credit for SS and Medicare. For our 2023 tax return, we want to change the primary taxpayer's name to my wife's name.  Can we change the primary taxpayer's name? We think that starting in 2023, my wife could get SS and Medicare credits. 

[xmasbaby0]

Do not change the order of the names on your tax return.   Changing the order of the names on your tax return will do nothing to help your spouse get SS or Medicare.  There are rules for SS that determine that--and where her name is on a Form 1040 is not one of them.

Changing the order of your names when you have been filing a joint return will confuse the IRS and mess up your tax return.  When you transfer the 2022 tax file to 2023, a lot of information comes over ----changing the names does not change where that information was and where it will go for 2023.   

Some information about SS and Medicare

https://blog.ssa.gov/access-your-earnings-history-with-my-social-security/

https://www.ssa.gov/prepare/check-eligibility-for-benefits

https://www.ssa.gov/medicare

[Vanessa A]

How is the business formed?  Are you an LLC or S-Corp or do you just file a Schedule C?  Which version of TurboTax do you use?  Was this intentional that you claimed all the income and she did not? Are you in a community property state?  Which state do you live in?

The first name or primary name on a return, does not determine who gets the credit for SS and Medicare. 

If your wife and you are 50/50 partners in a business, you should be splitting the income in some manner. If you both file a Schedule C reporting half of your business income, you both will be paying into Social Security and Medicare.  

If you have a partnership LLC you would file a 1065, and then you would both get a K-1 (depending on the state you live in) and you would again both pay SS and Medicare taxes on the income from the business that you each claim.  

You can split profit and loss anyway you want.  You can do it 25% to her and 75% to you, or 50/50 or 75% to her and 25% to you.  There isn't a specific number that you must use.  

The Maximum withholding for 2023 was $160, 200 so if your business is making more than that, and only one person is claiming all the income, then neither of you are getting credit for SS or Medicare for any amount over that, so splitting it would give you both some. 

So you will need to make changes to the income allocation, not the primary name on the return. 

Qualified Joint Venture

[MccTax 2023]

Thank you very much for your reply. We are self-employed (sole proprietorship) and not an LLC or corporation. Each year we filed a Schedule C and Schedule E.  We have a massage center (the owner's name is mine) and rental property owned by us, we both materially participate in the business. It was not intentional that I claimed all the income. When we registered our massage center business, we just put my name as an owner.  We live in Colorado. Can we file our tax that 20/80 or 15/85 for the 2023 tax return? How we can file 15/85? Or do we need to change our massage center's owner's name to my wife with Colorado, and then file our tax return? I just want to make changes to the income allocation for my wife if it's possible. Is it a qualified venture if we file two Schedule Cs and Schedule Es by splitting 15/85 profit/loss? 

[MccTax 2023]

Thank you. 

[DawnC]

Yes, if it is a Qualified Joint Venture, you can do an 85/15 split.  Leave the current Schedule C on your return, rename it or add your name as a suffix so you can tell them apart.   Then add a 2nd business/Schedule C and make your wife the owner of that one.    You will need to split, according to your agreement, the income and expenses.  

TurboTax will include both Schedule Cs and Schedules SE-T and SE-S (self-employment tax for taxpayer and spouse).   Each Schedule C represents a different business, so if you have vehicle expense or home office expenses, like all other expenses, those have to be split up, so you may need to report the same office or same vehicle on both returns.   Don't duplicate amounts; be careful to ensure you are dividing the expenses and not doubling them.   

• The couple must share net income and deductions in the same proportion as each spouse’s interest in the business. Their respective percentages of the business are determined by the partnership agreement.
• There must be no other partners in the business.
• Both spouses must materially participate in the business.
• Each spouse must include a separate Schedule C reflecting his/her share of the income and deductions on their joint tax return.
• Each spouse must include a separate Schedule SE that shows that spouse’s self-employment income with their joint tax return.
• If the business has employees, then one of the spouses must be designated as the party responsible for reporting and paying employment taxes for those employees.

There’s no formal election required to file as a Qualified Joint Venture. If you qualify as a QJV, you simply include Forms Schedules C and SE with your personal tax return instead of corporate or partnership tax returns. Unless you have employees, there is no need to apply for an Employer Identification Number (EIN).

[MccTax 2023]

Thanks a lot for your information and clarification. We'll file a QJV return.  

[MccTax 2023]

I have a question. We have a massage center (the owner's name is mine) and rental property owned by us, but we both materially participate 50/50% in the business. When we registered our massage center business, we just put my name as an owner. We usually make more income from the massage center, so can we file the massage center's income and expenses for my wife? To file the massage center's income for my wife, do we need to make a change for the owner's name with the state? How do we file 15/85?    

[DawnC]

How to file a Qualified Joint Venture, 2 Schedule Cs is above.    A qualified joint venture, for purposes of this provision, includes only businesses that are owned and operated by spouses as co-owners, and not in the name of a state law entity (including a limited partnership or limited liability company).    For your Schedule C that you have been filing, add ''taxpayer or your name'' to the name.   And name the new Schedule C the same business name with ''spouse or her name'' added.   You can name them whatever you want, but the current Schedule C needs to stay tied to your SSN and the new Schedule C needs to have your wife's SSN number, so you both get SS/Medicare credit.  

Married co-owners failing to file properly as a partnership may have been reporting on a Schedule C in the name of one spouse, so that only one spouse received credit for social security and Medicare coverage purposes. The election permits certain married co-owners to avoid filing partnership returns, provided that each spouse separately reports a share of all the businesses’ items of income, gain, loss, deduction, and credit. Under the election, both spouses will receive credit for social security and Medicare coverage purposes.