Great afternoon everyone! Happy Halloween those that celebrate! I hope you all are having a fabulous day. Today I bring you another post for 1099 v W2 and will be featuring Husband and Wife business also known as joint ventures of married couples. This is important because the IRS has different specifications for those couples that are partners or that are employed by one another.
The Small Business and Work Opportunity Act of 2007 changed the treatment of qualified joint ventures of married couples not treated as partnerships. Instead of being treated as a partnership for Federal tax purposes, the couple's business is now treated as a joint venture. Couples qualify under this act if the only members of the venture are husband and wife, both spouses materially participate in the business, and both spouses decide to file under the joint venture. The business also can not be in the name of a state law entity (such as a corporation, limited partnership, or limited liability company) except in some community property states. An EIN (employer identification number) is not required for the qualified joint venture. If a spouse already as an EIN, you cannot use that EIN for the joint venture.
In laymen's terms, this means that the business is split between husband and wife -- income, gain, loss, and credit and applied depending on the investment of each separate party. With the separate list items (usually listed on a Schedule C for self-employment), each spouse gets credit for social security earnings on which retirement benefits are based. The more you have made and contributed to social security, the more you are able to receive in return from the government when you reach the age of benefits.
Once the election is made, it can only be revoked with the permission of the IRS. So as always, I recommend to do your due diligence and research what might be best for your company before committing to doing something new on your tax return. A great resource is directly through IRS.gov. There is some clarification on this page Election for Husband and Wife Unincorporated Businesses.
I hope you find this information helpful!
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