Q. Can a married couple filing a joint return report self-employment income on a Schedule C instead of a partnership return in a community property state?
A. If the husband & wife elect Joint Venture status, the answer is yes. There are a few conditions, however. The only members of the joint venture can be a husband and wife, they both materially participate in the business, and both spouses must agree to the joint venture. When only one Schedule C is filed, you must allocate the Self-Employment taxes between the husband and wife. It is my understanding residence in a community property state is only an issue if the material participation rules are not met. Please check with your state of residence to see if this is allowable on the return filed for the state.