Qualified Joint Venture on a Schedule C
Desktop · Written guide Content date 2 min read
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For federal tax purposes, 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.
What is a Qualified Joint Venture?
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.
For a QJV, 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 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.
Caveats
Several important points:
- If the ownership and participation is anything other than 50/50, the business is not a QJV 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. An LLC jointly owned and operated by both spouses must file a partnership return. (A single-member LLC can file on a Schedule C; a business owned and operated by spouses through an LLC cannot.)
- In Tax Processors Plus Desktop, if you start the Schedule C as a QJV and then need to change it to not being a QJV, you'll have to delete the Schedule C and start over. Likewise, if you start the Schedule C as being owned by either the taxpayer or spouse and then need to change it to being a QJV, you'll have to delete the Schedule C and start over.
Program entry
To enter a Qualified Joint Venture in the individual tax return in Tax Processors Plus Desktop, from the Main Menu of the return select:
- Income
- Business Income/Loss (Sch C) - Select NEW to arrive at the menu selecting the ownership of the business.
- Qualified Joint Venture - A message will display indicating the requirements for a joint venture. Select YES.
You'll enter information into one Schedule C, however because it's a QJV Tax Processors Plus Desktop will create a separate Schedule C for each spouse, allocating 50% of the income and expenses to each, as well as separate Schedule SEs.
Additional Information: