In this column, we are to inform you about tax laws and it is our objective to offer such information in a simple and clear way. There are two ways for your wife to participate in the business: One is to make the choice of a partnership, which requires you to make two types of reports, one on a Form 1065 (Partnership) and the other on Form 1040 (Individual) and this requires you to follow the procedures that the IRS stipulates for this election. The other option is to make the election of a Joint Venture and thus only make an individual tax report (Form 1040). As a general explanation I present the following:
The previous situation is a typical case, 99% of independent carriers are unaware that there is indeed a way in which equal participation is given to the wife in the Social Security contribution. The Internal Revenue Service in its publication about Business Profits and Losses tells us that we have the option of including our wife in the direct participation of 50% of our transportation business through a Joint Venture. That is, we divide 50% of the revenues and 50% of the expenses (diesel, plates, insurance, washing, etc.) and those amounts would be reported in the Business Earnings and Losses report (Schedule C).
This report gives us the opportunity to establish the amount of income that corresponds to each one and that way, each one sends his corresponding contribution to Social Security. Doing it this way the IRS requires that the spouse's participation have to be direct activities with the business, as many wives keep accounts of income and expenses, and they are the ones who know in detail how the business situation is. Based on this, you would meet the requirements and could make the choice to report as a Joint Venture.
Do not hesitate; your wife can participate in the same way. The next time you visit your tax preparer; state your intention to file taxes as a Joint Venture to pay equal parts of Social Security. Remember that you can also correct the previous three years under this classification. For more information about this or another topic, please call (909)590-9307 to Gustavo Nunez, Your Enrolled Agent with the IRS or you can visit our office at 11756 Central Ave, Suite A, Chino, CA 91710.