joint sch C

[ljwalters]

I have a client who has been filing a joint sch C for 4 years now (community property state) and they split the SE tax. This year the box to check for joint is gone. It is a joint venture. They grose about half a mill and net about 200K. They want to both pay SE. What to do.

Is this a new law I missed. or is there a work around.

Also wife took on another job. can she claim mileage from her home business to her new job.

thanks for your input

Linda and buddy

[David1980]

The "joint" schedule C option was widely abused in non-community property states. Rumor is that the tax software companies were all asked to remove it. They did release "qualified joint venture" last year where you break everything up 50/50 and file two Schedule C's. This saves you from doing a 1065, but isn't as convenient as the joint checkbox.

(hopefully someone next year realizes it would be awesome to add a checkbox to automatically generate the two Schedule C's.)

[ljwalters]

Well that really sucks.........

Don't want to deal with this any more.

What do you think about doing one sch c and each year changing from spouse to filer and back.

Or would that cause problems.

Linda and buddy.

[fredazcpa]

do not know if this is correct, but have done in the past, before the split option, one C done with all the detail, the one last entry to 50 % of income as an expnese, then new C with just that amount as income, with an explantion that it is done just to split the net between the filers for SE purposes. Like I said not sure if correct, but did not have any come back. But be carefull, getting the divorice attonerys to understand what was happing, took the judge to make them understand what was going on.

[JohnH]

If you work with Excel, it's easy enough to design a simple spreadsheet to allocate the income & expenses. It would probably take 10-15 minutes to design one to mirror the relevant lines on the Schedule C, then save the template for future use. One thing I'd do is insert a field to calculate the percentage on each line, just in case you needed to depart from the 50% for a particular line in a given situation.

Most of these split C's would only have 10-15 entries, so transferring the info from the spreadsheet to the individual C's wouldn't be much of a hassle. Obviously not as handy as cheking a box, but since that isn't an option it's time to solve the problem another way.

[mcb39]

I spent hours on one this week. Now I MAY have to go and undo it all because spouse drew UC and have to ask if she is sure she wants me to do this. I don't have Excel and don't have time to learn anything new, let alone all of this splitting. I like Linda's idea better than fredazcpa's. However, I like things neat and tidy and wound rather do it correctly (whatever that means).......these are setting me so far behind and many more to come. It is like yesterday when I struggled with a MFJ and two MFS returns to end up with practically the same result. (and, yes, I did the worksheet, but couple was divorced in Feb and want to see the results both ways.)

Also, everyone is waiting to do FAFSA, like right away and the STRESS around here is TREMENDOUS!

Of course, this was discussed in detail a few weeks ago. Thank you IRS for this huge Sched C stumbling block.

[ljwalters]

mcb39

"...but couple was divorced in Feb and want to see the results both ways"

I hope you mean the couple was divorced Feb of 09. If it was '08 then there would be single only (with division of income for first 2 months only in CPS)

Linda and buddy

Ps thanks for all the input. this is a solid marriage. Both work very hard in the business, she does the office work and takes care of the bids while he, as she puts it, "just rides his toy and digs holes".

[BulldogTom]

Linda,

You may want to rethink the split on this. You can save them some money because the income limit on SS is being hit by the business, but when you split it, you are paying on all of it.

If she (or he, it does not matter) have enough quarters of credit for SS and Medicare purposes, and especially if she has another job, you may want to make her an employee and put all of it on his so you only pay SE tax up to the limit for one person. Pay her a small salary that she has to pay SS and he has to match, but keep a large chunk of it out of the 12.4% SE tax.

You have probably already told them this, but if the marriage is as strong as you say, there are thousands of dollars of tax savings available to them.

Tom

Lodi, CA

[mcb39]

mcb39

"...but couple was divorced in Feb and want to see the results both ways"

I hope you mean the couple was divorced Feb of 09. If it was '08 then there would be single only (with division of income for first 2 months only in CPS)

Linda and buddy

Ps thanks for all the input. this is a solid marriage. Both work very hard in the business, she does the office work and takes care of the bids while he, as she puts it, "just rides his toy and digs holes".

February 2009 for my divorced couple. Tom is right when it comes to that high of an income business. Mine are all in the $50 to $70 Thousand range.

[joelgilb]

how about convincing them to incorporate elect S-corp status and doing a payroll. Will then be able to allocate anyway they want with wages and then k-1 does the rest. Also may be able to save some SS by not paying 100% of income in wages

More money in their pocket and more in yours!