Joint Ventures and Two Schedule C’s

What's New

The IRS has ruled that spouses who jointly run a business are allowed to file two separate Schedule Cs with a joint return rather than only one Schedule C as with a partnership return. To qualify for this special qualified joint venture treatment, each spouse should report income and expenses on separate Schedule Cs based on their ownership stakes. This will allow each spouse to get his/her own credit for Social Security and Medicare coverage purposes rather than only filing one Schedule C under one spouse's name resulting in only one spouse receiving Social Security and Medicare credit. The same allocation of ownership in the business will apply for determining self-employment tax (if applicable) and the amount of Social Security eligibility.

To meet the requirements of a "qualified joint venture", only the husband and wife can be members of the joint venture; both spouses must participate in the business; both spouses must elect not to be treated as a partnership; and both spouses must be co-owners. Spouses who own either a limited partnership or limited liability company do not qualify.

Spouses electing qualified joint venture status are treated as sole proprietors for Federal tax purposes.

If you already have an EIN for the partnership, you cannot continue to use that same EIN for the qualified joint venture; the EIN should remain with the partnership. This EIN can be used again for the partnership if at some time in the future the qualified joint venture requirements are no longer met.

However, once the election is made, it can be revoked only with the permission of the IRS. If after a year the spouses fail to meet the qualified joint venture requirements, a new election will be necessary for any future year in which the spouses meet the requirements to be treated as a qualified joint venture.