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New Rules for Spouses in Business Together
You May Qualify for Simplified Reporting Using Schedule C


Spouses who operate a business together have a new option for reporting the business income and expenses.

In the past, husband and wife joint owners were technically considered a partnership for income tax filing purposes.  That meant they were required to file a Form 1065 partnership return.  In reality, many couples just filed a Schedule C naming one of them as owner with their joint personal return, and that meant only one spouse received credit for Social Security and Medicare tax.

New rules in effect for the 2007 filing season allow spouses the option of reporting their business income and expenses as two sole proprietorships, each using a separate Schedule C.  The income and expenses are allocated to each spouse based on their respective ownership interests.

In many cases, spouses likely will split income and expenses equally.  Each spouse reports his/her share of net earnings and each pays self-employment tax on that share.

There are a few key points to consider before making this election:

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