Small Business and Work Opportunity Tax Act of 2007
ProSeries Professional
The Small Business and Work Opportunity Tax Act of 2007 contains a Family Business Tax Simplification provision. This provision permits a qualified joint venture whose only members are a husband and wife filing a joint return to NOT be treated as a partnership for Federal tax purposes. (Previously, these businesses were supposed to file a Form 1065 reporting the income/loss on Schedule K-1.)
However, under this new provision, the IRS has determined that if a business is owned and operated jointly by a taxpayer and a spouse, either a partnership return should be filed and the income reported on a Schedule K-1 OR each spouse must file their own separate Schedule C, prorating the income and expenses based on each person's ownership percentage.
Exception: If a business is owned jointly as community property in a community property state and the owners are filing a joint return, the business may file either a joint Schedule C or a Form 1065.