Federal Tax, Tax

Understanding the Federal Tax Rules for Spouse Operated Businesses

Spouses who operate a business together must understand the federal tax rules involved. A spouse is considered an employee if there’s an employer/employee arrangement. For example, if one spouse controls the business and the other spouse is under his or her direction, the second spouse is subject to tax and FICA withholding. However, if the two spouses control and contribute to the business equally, they’re considered partners and should file Form 1065. Or the business might qualify as a joint venture if the spouses are the only two members. If they file a joint return and meet other conditions, the qualified joint venture isn’t treated as a partnership. Reach out to Cg for more information. © 2023