Dividing Schedule C Income

[Roger Fitzsimmons]

I have a small Schedule C business. I'm going to divide the work and the income with a partner, whom I might be married to by 2024. I receive a 1099NEC for the work.

If we're not married, can I just issue her a 1099 and deduct that on my Schedule C? And then of course she would report it as income. Is that the best way?

If we're married, do I just file two Schedule C's, one for her, one for me? It might seem to not matter but I would like the social security credits to attach to her; they do me no good.

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[Stuart O. Bronstein]

Roger Fitzsimmons <donts...@redtopbg.com> wrote:

> I have a small Schedule C business. I'm going to divide the work
> and the income with a partner, whom I might be married to by 2024.
> I receive a 1099NEC for the work.
>
> If we're not married, can I just issue her a 1099 and deduct that
> on my Schedule C? And then of course she would report it as
> income. Is that the best way?

That's one approach. If you do that, you both will be subject to self-
employment tax in addition to regular income tax.

> If we're married, do I just file two Schedule C's, one for her,
> one for me? It might seem to not matter but I would like the
> social security credits to attach to her; they do me no good.

If you're married you can file two Schedules C but only if you live in
a community property state. Otherwise you need to file a partnership
tax return. You could also set up an S-corporation, and potentially
save some of the self-employment tax.


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Stu
http://DownToEarthLawyer.com


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[Taxed and Spent]

On 2/28/2023 11:00 AM, Stuart O. Bronstein wrote:
> Roger Fitzsimmons <donts...@redtopbg.com> wrote:
>
>> I have a small Schedule C business. I'm going to divide the work
>> and the income with a partner, whom I might be married to by 2024.
>> I receive a 1099NEC for the work.
>>
>> If we're not married, can I just issue her a 1099 and deduct that
>> on my Schedule C? And then of course she would report it as
>> income. Is that the best way?
>
> That's one approach. If you do that, you both will be subject to self-
> employment tax in addition to regular income tax.

Can you suggest other approaches?

>
>> If we're married, do I just file two Schedule C's, one for her,
>> one for me? It might seem to not matter but I would like the
>> social security credits to attach to her; they do me no good.
>
> If you're married you can file two Schedules C but only if you live in
> a community property state. Otherwise you need to file a partnership
> tax return. You could also set up an S-corporation, and potentially
> save some of the self-employment tax.
>
>

--

[Stuart O. Bronstein]

Taxed and Spent <nospam...@nonospam.com> wrote:
> Stuart O. Bronstein wrote:
>> Roger Fitzsimmons <donts...@redtopbg.com> wrote:
>>
>>> I have a small Schedule C business. I'm going to divide the
>>> work and the income with a partner, whom I might be married to
>>> by 2024.
>>> I receive a 1099NEC for the work.
>>>
>>> If we're not married, can I just issue her a 1099 and deduct
>>> that on my Schedule C? And then of course she would report it
>>> as income. Is that the best way?
>>
>> That's one approach. If you do that, you both will be subject to
>> self- employment tax in addition to regular income tax.
>
> Can you suggest other approaches?

They could be taxed as a partnership or an S-corporation. They could
also set up a C-corporation, but that's not likely to be helpful to
them.

>>> If we're married, do I just file two Schedule C's, one for her,
>>> one for me? It might seem to not matter but I would like the
>>> social security credits to attach to her; they do me no good.
>>
>> If you're married you can file two Schedules C but only if you
>> live in a community property state. Otherwise you need to file a
>> partnership tax return. You could also set up an S-corporation,
>> and potentially save some of the self-employment tax.


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Stu
http://DownToEarthLawyer.com


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[Roger Fitzsimmons]

I am assuming that the total self-employment tax won't change. My earned income is way under $160K, so every dollar of income transferred to her will trigger 15.3% self-employment tax on her, but reduce the self-employement tax on me dollar for dollar.

[Stuart O. Bronstein]

> I am assuming that the total self-employment tax won't change. My
> earned income is way under $160K, so every dollar of income
> transferred to her will trigger 15.3% self-employment tax on her,
> but reduce the self-employement tax on me dollar for dollar.

That's correct. However if your business could be taxed as an S-
corporation, you might be able to save some of that self-employment

tax.


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Stu
http://DownToEarthLawyer.com


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