Husband andWife LLC

Today TaxMama hears from Rachel in the TaxQuips Forum, who needs clarification.

“My husband and I are the only owners of our LLC. From my understanding, in our state (Arizona) we can file a schedule C with our 1040. When I try to do this with TurboTax it prompts me to divide all the expenses and sales by two  – and complete a separate Schedule C for each of us, using the same EIN. Does this make sense? Is there anything else we have to do?”

Hi Rachel,

I understand what TurboTax is asking for.  You see, several years ago, IRS ‘simplified’ partnership filing for married couples. Just read this and watch your head spin!

As long as you don’t have any payroll (employees), this works out pretty easily. It splits the profits between you and your husband, so EACH of you pays into your Social Security account.  In the old days, before simplification, we just checked a box on the Schedule C input for JOINT Schedule C and the computer split the profits and produced two Schedule SEs.

Of course, if you attribute ALL the profits to just one of you, then one person’s SS account soars and will generate much higher benefits (if the LLC is highly profitable).

That way, you might generate more money to share in your retirement than two accounts with less money.  You can, of course, just report it all on one Schedule C, if you like, to achieve that effect.

So, those are your options – one or two Schedule C’s, instead of filing a partnership return.
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