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cockswain's avatar

My wife had a business last year. Should we still file our taxes jointly?

Asked by cockswain (15186 points ) March 13th, 2011

I’ve done some quick google searches on this, but figured I might as well tap the considerable resources of Fluther as well.

My wife and I have filed jointly since we’ve been married. Last year, she ran a small business that lost money. We own a house we live in, and own a property on which we collect rental income. I’m the one that does the taxes, and I find it to be a PITA since the tax software I’ve used doesn’t handle rental income/loss very clearly and intuitively. I’m thinking figuring taxes on her small business will be an even bigger PITA.

I know I could use the software to file both ways and see which reduces our tax liability the most, but if I can avoid several hours of additional work with good advice, that would be better.

Also, does having a small business complicate things to the point that I don’t want to mess with it as an “amateur” tax preparer? I’ve got a good head for numbers, but don’t want to make a significant error if it is easy to do so. FYI, I’ve used TaxAct online the last couple years, and was thinking of trying TurboTax instead. TaxAct seems better for simpler taxes. If someone has a good software recommendation, I’d welcome the suggestion.

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8 Answers

BarnacleBill's avatar

How was the business organized? Did she draw a salary? The business may have to file its own return.

I would bite the bullet and get professional help.

cockswain's avatar

It was loosely organized. It was just her, and she staged homes for sale with art and furnishings created by local artists. Just guessing, she probably poured $7K-$9K into it, with revenues around maybe $2K. She might have spent around $500 on help from other people. I couldn’t really say she drew a salary. She just sustained herself from our savings.

AmWiser's avatar

It’s possible that you might be able to file a Schedule C if you are self-employed full or part time as a sole proprietor. Look at the form and see if you want to tackle it yourself. It’s not terribly difficult, but if it’s not done right it could be questionable to the IRS. Also you should look into having a tax pro prepare your taxes as a free estimate to see if you want to go that route. Good luck.

marinelife's avatar

The only way to know for sure is to calculate them both ways. However, since her business took a loss, it would seem that filing jointly would be beneficial.

cockswain's avatar

@marinelife Can you explain why that would make it beneficial?

geeky_mama's avatar

My husband has a business (LLC) – and like your wife he also ran at a loss for 2009 and 2010. Our accountant has always had us file jointly (and I have always had my employer take out more taxes).

There are specific positives and negatives to our situation. For example, one negative is that you’re responsible (as anyone who is self-employed) for both the employer and employee portions of FICA and Social Security taxes.
One positive is that our office space in our home (and depreciation of that space and the vehicle used for his business miles) get us some taxation relief.

If you can afford it (around $100) I strongly suggest you find an accountant to assist you. There are SEVERAL very specific forms, estimations and expense tracking requirements for small business owners that I cannot imagine a consumer packaged software having the ability to cover adequately.

Also, your tax preparation expenses can be written off (next year’s taxes).
Our accountant has been worth every penny we’ve paid each year.

geeky_mama's avatar

Ah…I just read more above…where you stated that she was “loosely organized”.
Um, yeah, that doesn’t bode well. Been there, done that – got screwed royally despite not making much money.

For taxation purposes she really needs a Employer Identification Number (EIN). First and foremost I advise you to seek a trained accountant who can assist you in perhaps forming an LLC (no need to be “incorporated”).

After that it will be easier for her to realize expenses in the name of the business. Might be a tough filing this year, though. Being just “self-employed” is different than being a small business. I’ve done both—and I lost considerable money being self-employed.

marinelife's avatar

@cockswain You will have your social security taxes, which may be enough if your wife had a loss.

Also, you will be able to put her business loss against your income to decrease the amount of taxes that you owe.

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