Qualified Joint Venture on a Schedule C

Qualified Joint Venture on a Schedule C

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 for federal tax purposes. 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 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.

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.

Two important points:

  • If the ownership and participation is anything other than 50/50, the business is not a Qualified Joint Venture 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. Only a single member LLC can file on a Schedule C and not a LLC owned by a taxpayer and spouse.

To enter a Qualified Joint Venture in Software, from the Main Menu of the Tax Return, (Form 1040) select:

  • Income
  • Business Income/Loss (Sch C)
  • NEW
  • Qualified Joint Venture - A message will display indicating the requirements for a joint venture. Select YES.

A separate Schedule C and Schedule SE will automatically be created allocating 50% of the income and expenses to each spouse.


    • Related Articles

    • Schedule C negative expenses

      Occasionally an individual taxpayer's Schedule C may have a negative expense. For example, for a particular expense category if the taxpayer receives a refund for a prior year's expenditure that is more than the current year's total expenditures, the ...

    • Suspended or Unallowed Loss on a Schedule C

      A taxpayer operating a business reported on a Schedule C is usually deemed to be materially participating in the business. This designation is indicated on Line G of Schedule C, and in the Schedule C Edit Menu in Softwar it is found here: Answer ...

    • Schedule SE - Self-Employment Tax

      Who Pays Self-Employment Tax? Taxpayers pay SE tax when earnings from self-employment are $400 or more. A taxpayer is self-employed if he or she carries on a trade or business as a sole proprietor (including farmers) or as a general partner in a ...

    • Why can't I mark check boxes on line 4a or 4b of Schedule EIC?

      The earned income credit, or EIC, is a refundable credit for workers who meet certain requirements and file a tax return. For a taxpayer with a qualifying dependent, the dependent must meet the age test. Software will automatically calculate EIC ...

    • Where Can I Get A List Of The Codes That Are Entered In Box 12?

      There are several types of compensation and benefits that can be reported in Box 12 of Form W-2. Box 12 will report a single letter or double letter code followed by a dollar amount. The following list explains the codes shown in Box 12 of Form W-2. ...