Combining Income

[jacob1733]

What is the name of your state? TN

My wife runs her own salon as a sole proprietor (no LLC/S corp).

I am a partner in an S-corp and receive a K-1 1065.

Can we combine our income and expenses on single 1040 Schedule C?? The reasoning is that I will be able to write off more business expenses than I actual earn through my S-corp. My deductions would carry over and help bring her business income down.

Also, is there a good home software (turbo tax premier...etc.) that does a good job with self employed households? Our books are relatively clean and simple and we haven't shown a need for quick books or quicken.

Thank you guys so much!

 

[abezon]

No bleepin' way. Each activity gets its own Schedule C. Multiple Schedules C for the same person get combined to determine self employment taxes. However, one spouse's net SE loss cannot offset the SE taxes the other spouse must pay. SE income is combined for purposes of determining your AGI & income tax.

 

[LdiJ]

No bleepin' way. Each activity gets its own Schedule C. Multiple Schedules C for the same person get combined to determine self employment taxes. However, one spouse's net SE loss cannot offset the SE taxes the other spouse must pay. SE income is combined for purposes of determining your AGI & income tax.

I am going to disagree slightly. I agree 100% that he cannot combine his income with hers on a single schedule C....but something isn't quite right in his description.

An S-Corp is not a partnership, therefore it would not file a 1065, it would file an 1120S.
His income would then go on schedule E. He would still receive a schedule K-1. However, losses from the S-Corp can go against other income on their combined return, for regular income tax purposes, just not for SE tax purposes.

 

[jacob1733]

I am going to disagree slightly. I agree 100% that he cannot combine his income with hers on a single schedule C....but something isn't quite right in his description.

An S-Corp is not a partnership, therefore it would not file a 1065, it would file an 1120S.
His income would then go on schedule E. He would still receive a schedule K-1. However, losses from the S-Corp can go against other income on their combined return, for regular income tax purposes, just not for SE tax purposes.

nice catch...last year the company was an LLC (1065). We have since changed to an S-Corp (1120S).

It makes sense that I wouldn't be able to write off my loses to reduce her SET, but my loses could reduce our total income tax.

Any advice on the second question on a good tax software program for the self employed?

 

[LdiJ]

nice catch...last year the company was an LLC (1065). We have since changed to an S-Corp (1120S).

It makes sense that I wouldn't be able to write off my loses to reduce her SET, but my loses could reduce our total income tax.

Any advice on the second question on a good tax software program for the self employed?

I am not a fan of most retail tax software for situations like yours. That is because most of it uses a question and answer format, and for returns that are not basic, it leaves simply way too much room for error. I can do a return by hand and get a result. I can do that same return on our firm's professional software and get the same exact result, and then I can do that same return on retail software that uses a question and answer format, and get a completely different result.

However, there are some online sites that do not use so much of a question and answer format, that are good. I like taxesanytime.com myself.