Husband and Wife Businesses

Tom Friedel, Padgett Business Services

Both spouses carrying on the business
Generally a qualified joint venture whose only members are a husband and wife filing a joint return are not treated as a partnership for Federal tax purposes. A qualified joint venture is a joint venture involving the conduct of a trade or business, if (1) the only members of the joint venture are a husband and wife, (2) both spouses materially participate in the trade or business, and (3) both spouses elect to have the provision apply. Under the provision, all items of income, gain, loss, deduction and credit are divided between the spouses in accordance with their respective interests in the venture. Each spouse takes into account his or her respective share of these items as a sole proprietor, each filing a Schedule C. For purposes of determining net earnings from self-employment, each spouse's share of income or loss from a qualified joint venture is reported on Form SE. This generally does not increase the total tax on the return, but it does give each spouse credit for social security earnings on which retirement benefits are based.

One spouse employed by another
If your spouse is your employee, not your partner, you must pay Social Security and Medicare taxes for him or her. The wages for the services of an individual who works for his or her spouse in a trade or business are subject to income tax withholding and Social Security and Medicare taxes, but not to FUTA tax.


Husband and Wife Businesses Tom Friedel, Padgett Business Services Both spouses carrying on the business Generally a qualified joint venture whose only members are a husband and wife filing a joint return are not treated as a partnership for Federal tax purposes. A qualified joint venture is a joint venture involving the conduct of a trade or business, if (1) the only members of the joint venture are a husband and wife, (2) both spouses materially participate in the trade or business, and (3) both spouses elect to have the provision apply. Under the provision, all items of income, gain, loss, deduction and credit are divided between the spouses in accordance with their respective interests in the venture. Each spouse takes into account his or her respective share of these items as a sole proprietor, each filing a Schedule C. For purposes of determining net earnings from self-employment, each spouse's share of income or loss from a qualified joint venture is reported on Form SE. This generally does not increase the total tax on the return, but it does give each spouse credit for social security earnings on which retirement benefits are based. One spouse employed by another If your spouse is your employee, not your partner, you must pay Social Security and Medicare taxes for him or her. The wages for the services of an individual who works for his or her spouse in a trade or business are subject to income tax withholding and Social Security and Medicare taxes, but not to FUTA tax.
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