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I run a software consulting business as a sole-proprietor

and receive 1099 income. I...
I run a software consulting business as a sole-proprietor and receive 1099 income. I also run a business where I receive K-1 income. My wife helps with bookkeeping for the consulting business. We pay for child-care for my daughter and I would like to know how to take the Child and Dependent Care tax Credit for the amount that we pay for this care.
It seems that I need to define the consulting business as a “joint venture” in order for us to qualify for this tax credit since my wife has no earned income otherwise (and therefore can’t take child care tax deductions). Is that correct? If so, what is the process to “add” my wife to the software consulting business for tax purposes?
Thank you,
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Answered in 2 minutes by:
3/21/2017
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,132
Experience: Taxes, Immigration, Labor Relations
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You may treat your consulting business as a “joint venture” - and divide income and deductions between two schedule Cs and SEs

Another option - if you hire your spouse as subcontractor and issue 1099misc to her - so she will have her separate business.

The result will be the same.

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Customer reply replied 8 months ago
Ok thanks for the advice. So for instance if my software consulting business is called "ABC CONSULTING" and makes $60k per year, can I put $50k on my schedule C under "ABC CONSULTING" and $10k on her schedule C under a business with the same name ("ABC CONSULTING") since she just does the book keeping? Would that be a proper way to handle this? Or do the divisions need to be perfectly even? Is there anything else that I need to do to file it as a joint venture, or is simply dividing the profit between mine and her schedule C's good enough?

Yes - that is possible to split as a “joint venture” - your may have or not have a specific name for your business - that is not required.

You may apportion income as you both agree - the IRS will not question that because that will not affect tax calculations.

That is strictly between you and your spouse.

Juts be sure to allocate expenses in the same proportion.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,132
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