A taxpayer and spouse may elect to report the business income from an unincorporated business on their Schedule C as a Qualified Joint Venture (QJV) instead of reporting this business activity as a partnership for federal tax purposes. In order to properly calculate each individual's share of income and expenses, the IRS requires that the taxpayer and spouse file separate Schedule C's and Schedule SE's.
A QJV allows a married couple operating a business to avoid filing a separate partnership return (Form 1065) or even obtaining an Employer Identification Number. Instead, the married couple can report all of their business activity from their unincorporated business on Schedule C (Form 1040) in their personal tax return.
A business is consider a qualified joint venture if all of the following apply:
- A joint return is filed for the tax year,
- The only owners of the business are the taxpayer and spouse,
- BOTH spouses materially and equally participate in the trade or business, and
- BOTH spouses elect to have the provision apply.
Two important points:
- If the ownership and participation is anything other than 50/50, the business is not a Qualified Joint Venture and separate Schedule Cs will need to be prepared for the taxpayer and spouse.
- A Limited Liability Company (LLC) is an entity created under state law to allow its members/owners to operate a business in the name of the LLC. As such, it cannot be treated as a QJV even when the owners of the LLC are a married couple. Only a single member LLC can file on a Schedule C and not a LLC owned by a taxpayer and spouse.
To enter a Qualified Joint Venture in TaxSlayer Pro, from the Main Menu of the Tax Return, (Form 1040) select:
- Business Income/Loss (Sch C)
- Qualified Joint Venture - A message will display indicating the requirements for a joint venture. Select YES.
A separate Schedule C and Schedule SE will automatically be created allocating 50% of the income and expenses to each spouse.