Income tax 2022-2023. Business owned and operated by spouses. Let's do some wealth preservation with some tax preparation. Support a counting instruction by clicking the link below, giving you a free month membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Most of this information comes from the tax guide for small business for individuals who use Schedule C Publication 334 Tax Year 2022. You can find on the IRS website, irs.gov, irs.gov. Looking at the income tax formula we're focused online, one that being income. Remembering that the first half of the income tax formula is in essence an income statement. Although it's also an outline, a form of scaffolding, many other forms and schedules flowing into it. This half of the income tax equation in essence representing page one of the form 1040. When we're looking at the income line, one of the things that will flow into it would be the Schedule C. The Schedule C being an entire income statement in essence in and of itself. Income minus expenses, the expenses basically being the business deductions. Looking at form 1040. We're here on line eight other income from Schedule 1. This fluid in from the Schedule C to Schedule 1 to first page of the 1040. This is the net income, not the gross income. Here's a Schedule C, which is in essence an income statement. Income minus expenses, the net is what flowed through the Schedule 1 and to the 1040. So now let's think about a situation where we have a business owned and operated by spouses. So in other words, when we think about a sole proprietorship, we typically think of one individual that's starting a business. One individual, for example, that starts a hot dog stand is for tax purposes in essence automatically a sole proprietorship, because they started generating money and they didn't incorporate or have some other form of operation and therefore they're a sole proprietorship and the IRS wants a piece of that hot dog stand. But if you have two or more people that started the hot dog stand, now you are in essence a partnership. So if you're just doing a profit sharing situation with two or more people, the problem is you can't just report that information on the Schedule C because you have different people reporting different Schedule C's and therefore normally you have to report a partnership return, which is a flow through type of entity, meaning you're not taxed on the partnership level, but rather you have to do a partnership information return in order to generate the K1s, which are kind of like W2s from the partnership in a sense that they're going to report your income, except it's going to be the full income that flows in through to the partners who can then use the K1s to report their share of the income on their forms 1040. But what about a marriage situation? That's an interesting situation because the general idea would be for tax purposes, you had one entity or two separate entities to start with and then they got married. So they should be one taxable entity. They were two, now they're one. Isn't that the blessing of marriage and whatnot? But for taxes, it gets a little bit more messy than that in part, not just because of the income tax situation because you might say, well, who cares if the income is received by one spouse versus the other spouse because it's going to be reported on their joint income tax return possibly. However, the Social Security becomes an issue because when you report the income for a sole proprietorship on a schedule C, you're also going to have to be paying the Social Security taxes and you might say, well, who cares? It's going to be one entity paying the Social Security tax and it's the same rate, same cost. But the benefit of paying into the Social Security program will result in you getting Social Security payments calculated at the end of the Social Security program. And that is based not on a marriage basis, but on an individual's basis, meaning it's laid out by person by social security number. So that becomes an issue. How are we going to be allocating the income that's being paid for the self-employment tax? And obviously from a tax planning standpoint, we would like to do so. So it maximizes the amount of Social Security benefits that we're going to be receiving at Social Security time. So we have that to deal with as well. When we have this partnership spouse with one business, those are some of the issues that cause some of these problems. So if you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership whether or not you have a formal partnership agreement. Now note that whenever you go into business, like if you just started your hot dog stand with two or more people and you didn't make any other agreement then you might just have a verbal agreement or you might basically just split the revenue evenly through however many of you there are. But clearly it would be much better to set up any formal agreement. And people often kind of don't do this with people that they know like family for example because they just assume that their family members family family can read their mind because they're so close in this knot. And that's in my opinion and in my experience, horrible idea. You want to lay out exactly what everybody basically is expecting from the partnership. So everybody's on the same page and we don't have any kind of bad feelings that people are not are being taken advantage of within any kind of partnership arrangement. And I would think that would a marriage if you could be more open about that kind of partnership in terms of what your expectations are and what you're looking for then that would be good. But obviously if you're a married couple even that's going into a business setting it's quite natural to think well my spouse can read my mind and so we don't need a formal agreement. But you probably want a formal agreement just to make sure everyone's on the same page here. So do not use a Schedule C instead file form 1065 US Return of Partnership Income for more information see publication 541 partnership. Now there is an exception here. So if you're in that situation you might have to you could file a partnership return even though it's two spouses that own the what would be sole proprietorship type of business which would now be designated a partnership in that situation. Here's an exception community income. So if you and your spouse wholly own an unincorporated business as community property under the community property laws of a state foreign country or US possession you can treat the business either as a sole proprietorship or a partnership. So states with community property laws include Arizona California Idaho Louisiana Nevada New Mexico Texas Washington and Wisconsin. So now you've got to go down to the state law and say what does it mean to be married from the state perspective. And remember that there's a differentiation from between federal law and the state law and the marriage contracts are typically under state law designations and whatnot. So then you've got this designation of community property states or non community property states. If you're in a community property state then then you may be able to do this a little bit more easily with spouses that own and operate a business by just by having a schedule C C business and hopefully be able to and then again there's no big problem with the income tax really. The issue comes in with being able to allocate properly the social security taxes in a way that you can kind of maximize the social security benefits that are going to be allocated out to the two individuals in the partnership the two spouses in this case. So a change in your reporting position will be treated as a conversion of the entity C publication 555 for more information about community property laws. So exception qualified joint venture. So here's another type of exception qualified joint venture. So if you and your spouse each materially participate as the only members of a jointly owned and operated business and you file a joint return for tax year you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. So making this election will allow you to avoid the complexity of form 1065 the partnership tax return a whole another entity tax return but still give you each spouse credit for social security earnings. Now that's the key. So again that's a key that whole social security earnings things could be a big deal because of the benefits on which your retirement benefits are based. So for an explanation of quote marital participation in quote see the instructions for schedule C line G caution only businesses that are owned and operated by spouses as co-owners and not in the name of a state law entity qualify for the election. Thus a business owned and operated by spouses through an LLC does not qualify for the election of a qualified joint venture. So if you're an LLC the issue with an LLC was that normally an LLC is like a part is taxed kind of like a partnership with a separate legal entity but we thought we saw that sometimes you might have a single member LLC and if you were a single member LLC then possibly you can still file a schedule C even though you have the single member LLC which hopefully is there to give you some more liability protection perhaps but if you're if you're like two spouses you might not be able to do that single member LLC situation however you may still be able to do a normal LLC which means you'd be filing in essence like a partnership another entity type of return which would be more complex than just a schedule C situation. So to make this election you must divide all items of income gain loss deduction and credit attributable to the business between you and your spouse in accordance with with your respective interests in the venture. So if it's a 50-50 thing you'd have to split it all up or whatever the agreement is each of you must file a separate schedule C and a separate schedule SE. So that's a bit tedious obviously but it might be easier than another than having a whole nother form that partnership return. So for more information see qualified joint ventures and the instructions for schedule for schedule SE that's going to be the self-employment tax.


Therefore, it's now time for a member of statements. The member from Kitchener, Conest, Obe. Yes, sir. Well, thank you, Speaker. Today, Speaker, I stand and ask those in the House and those across the province in recognition and support of Rare Disease Day. Internationally, Rare Disease Day is celebrated the last day of February. This year, today, February the 29th, a rare day in itself. And today, participants from over 85 countries and regions are taking part in over 650 events from symposiums and debates to marches, exhibitions and concerts. And while we see today some acknowledgement from this government on the need to address the challenges faced by our rare disease patients, it's my hope that through recognition of Rare Disease Day in Ontario, we can help move that acknowledgement to action and the answers sufferers deserve. The truth is, Speaker, that while there are one in 12 Canadians affected by rare diseases, many in the public, the media and the government are unaware of the challenges patients face across the province to diagnose and treatment. There are actually over 7,000 recognized rare diseases. And yet, despite those growing numbers, rare disease patients are most often forced to suffer in isolation without the support, awareness and resources available to those with more commonly diagnosed diseases. The recognition of Rare Disease Day is one way we can continue to work to build the support and awareness. Thank you, Speaker. Thank you. Further member's statements? The member from London West. Thank you, Speaker. I'm pleased to rise today to recognize Emma Donahue, author, screenwriter and London West constituent. Londoners and indeed all Canadians are incredibly proud of Donahue's Academy Award nomination for the screen version of her critically acclaimed novel, Room. This international bestseller published in 2010 is a harrowing but uplifting exploration of a mother's love for her son. Room went on to be shortlisted for just about every literary prize there is, including the Man Booker. As a film, Room earned more accolades, including the People's Choice Award at TIFF, four Academy Award nominations, and last night, the Oscar for Best Actress. Donahue's extraordinary achievement is notable on several fronts. First, her literary and commercial success shows the importance of public investments to encourage the writing, publishing, distribution, and promotion of books by Canadian authors and poets. Second, TIFF provided a catalyst for Room to draw film audiences worldwide, reinforcing the value of the festival and profiling Canadian talent on an international stage and the economic impact of financial support for Ontario's film and cultural sector. Third, with females making up only about 10% of movie screenwriters and very few leading roles written for women, Donahue's insistence on adapting Room for the screen herself makes her a powerful role model for women in the film industry. Speaker, I know I speak for all MPPs in saying to Emma, we celebrate your incredible talent, we congratulate you on your many achievements, and we can't wait for your next book, The Wonder, to be released on September 27th. Thank you. Thank you. For the member states, the member from Beaches East York. Well, thank you, Speaker, and these are sunny days in my riding of Beaches East York. All along the beach, on Family Day Weekend past, I had the pleasure of joining local Councillor Mary Marriott McMahon for the grand opening of our winter stations, right across the boardwalks of Beaches East York. The event in its second year turns the beach into a magical and inviting place in the winter by transforming the beach's lifeguard stations into unique art exhibits. The art exhibits are selected by a jury with representation from architectural firms, the City of Toronto, and consultants in the GTA, and the competition this year almost doubled its participation with 372 submissions from 49 different countries, and of those submissions, eight were chosen, the installations were built, and they will continue to be exhibited until March the 20th. So the winter stations have brought the boardwalk alive for a second year in a row, with participating projects from across the province, including OCAD University, Ryerson, and Laurentian University, and from other people around the world. Now these exhibits attract visitors to Beaches East York area, and they give a great boost to local restaurants and other businesses.  So Speaker, I would encourage all members of this House to take advantage of this wonderful opportunity to come down to my writing and experience these unique and wonderful artistic installations. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. The member from Perth, Wellington. Thank you Speaker. Today I rise to remember and pay tribute to Vic Hader. Vic passed away on February 23rd at the age of 77. Vic was an incredibly successful businessman and community leader. He purchased his first hotel 43 years ago and went on to own a number of very successful businesses. In Stratford, he owned the Arden Park Hotel and the Festival Inn. Vic will be remembered for his humble and hardworking spirit. He supported the Stratford Rotary Complex, Stratford General Hospital, the Stratford Perth Humane Society, Stratford Summary Music, church groups and many other community organizations. Vic's love for animals is clear to anyone who saw him with his cocker spaniels. I will remember Vic as a well respected member of the racehorse community. I would like to extend my condolences to Vic's wife Joanne, his children Edward, Stephanie, Gregory and their partners, his grandchildren and all of his family and friends. Today in Stratford, they honoured Vic at a funeral service at the Stratford Festival. I have no doubt that many are mourning his loss and sharing the special memories he has left behind. Vic will be remembered for all he did to make Stratford such a wonderful community. Thank you Speaker. Thank you for the member's statements. Thank you very much Mr. Speaker. I rise today to discuss the issue of privacy and security. A recent case in the States has raised issues around how important this issue is when it comes to our personal data with regards to our phones. In the U.S., there's a court case right now which is ordering Apple to unlock an encrypted phone. It raises questions around how important our personal information is. We acknowledge the importance of our personal information when it comes to our health information, but what about all of our digital communications? We know in a similar analogy that we have a lot of personal information in the U.S. analogy that tampering with mail is a serious federal offence. If you are to steal mail, it's an offence that can be tried by indictment for up to ten years in jail as a punishment. In fact, stopping mail with the intent to search it or to rob it is another indictable offence with up to life imprisonment. So it shows that as a society we acknowledge the importance of our communication being secure and private. In fact, I would make the argument that secure and private information in terms of our communication is linked to our freedom of thought and expression. So as a default in our province, we don't have laws that clearly regulate and ensure protection for the public with respect to our communication, whether it's digital through email or through texting or through other forms of communication. So we need to look at this issue as a human rights issue, as a freedom of thought issue, and make it a default that our communications are encrypted or secure so that we ensure the privacy of our information in much the same way we protect our information through the mail. Let's move forward in a new technological and digital era and address this issue. Thank you. I'm very proud to rise in the House today to recognize a fantastic individual for my great writing of Davenport, Beverly Gordon. Beverly's contribution to my writing and to our province can best be measured by the hundreds of Ontario families whose lives have been positively impacted through contact with her and the Safe Haven project for community living located in Davenport, which she founded 25 years ago and of which she was CEO. For those who have not had the privilege of visiting Safe Haven, it is an invaluable organization that provides residential and respite services to families with children with multiple disabilities and complex medical needs. Beverly wholeheartedly believes that every child is special and can flourish with the support of their families and the community. Under her direction, Safe Haven has enriched the quality of life and significantly extended the lifespans for medically challenged children in our province. Today, her vision has taken on a broader scope as other communities have set up services using the innovative Safe Haven model. Beverly has lived her life with remarkable selflessness dedicated to making life better for some of our most vulnerable citizens. I truly mean it when I say that I could not be more proud to have been present as she received the order of Ontario just a short few weeks ago. On behalf of the families whose lives you've changed for the better and those whom Safe Haven will continue to help, thank you for all that you do, Beverly. Thank you Mr. Speaker. Thank you. The member from Oxford. Thank you very much Mr. Speaker and please rise today to report the results of my annual survey of Oxford businesses and I want to thank everyone who took time to respond. Again this year the cost of doing business in Ontario was a major concern. Ninety-two percent of the businesses said they would be negatively impacted by the mandatory pension plan and sixty-seven percent said the impact would be significant. All of the respondents said they had been impacted by the increase in hydro cost and seventy-two percent said the impact was significant. Businesses reported their biggest challenges were, quote, rising government cost, hydro rates and increasing cost. Last week the government had an opportunity to address these concerns but instead presented a budget that will make it more expensive for both people and businesses in Ontario. This year I launched my business survey during the CFIB Red Tape Awareness Week and it seems appropriate given that seventy-five percent of respondents said that red tapes has been increasing. Business reported that the cost of red tape is significant. One said it cost them tens of thousands of dollars. Another said fifty-thousand dollars a year. One small business said that red tape has reduced their revenue by twenty-five percent. These businesses are facing real challenges and the government's red tape reduction photo ops haven't solved the problem. Mr. Speaker I want to thank all the business operators who took the time to tell me about their company and to share and share the challenges that they are facing. We know how hard they work and I hope that the government will listen to their concerns so that we can create a climate where our businesses can succeed. Thank you. For the member state, Mr. Member from Mrs. Saga-Earndale. Mr. Speaker we all know that Ontario's highest official order of Ontario is awarded to exceptional individuals who have benefited other individuals by excelling in any field. Mr. Speaker it is an honour and a privilege for me to talk about Madeleine Edwards who has been awarded the order of Ontario for 2015 and is an outstanding constituent of my writing of Mrs. Saga-Earndale. Mr. Speaker Madeleine Edwards is known for her staunch advocacy for social justice. As we celebrate the Black History Month it is important for us to celebrate the contributions and the extraordinary work that people like Madeleine Edwards performed day in day out. Madeleine has been a long-term leader and a voice for the community. She was the founding member of Mrs. Saga and area chapter of the Congress of Black Women of Canada, an organisation dedicated to improving the lives of Black women and their families. She created a programme called Suffering in Silence to support women who remained in abusive relationship due to poverty and unemployment. This programme formed the basis of a non-propped housing complex where the victims of abuse could find a secure and safe place to live. Mr. Speaker I am very proud of Madeleine's work and contribution to our city and our province. On a personal note Mr. Speaker I want to thank her for her continued support, advice and advocacy on behalf of my constituents. Mr. Speaker let me take this opportunity to congratulate Madeleine Edwards who is sitting right here on the east galley for receiving the province's highest honour, the Order of Ontario and be sure all the best in future endeavours. Thank you. Congratulations for their member's statements, the member from Ajax, Peckery. Thank you Speaker I'm in the house today to acknowledge Grandview Children's Centre. It's the only children's centre treatment wise in Durham region providing expert pediatric treatment rehabilitation services to well over 5,000 children and youth with special needs. Grandview has been operating in the region of Durham for some 63 years and his headquarters are in Oshawa. On November 20th 2015 the Minister of Children and Youth Services Tracy McCharles, Durham MPP Granville Anderson and myself joined Ajax Mayor Steve Parrish and all members of Ajax Council when they announced that the town was giving Grandview Children's Centre a five-acre parcel of land on Harwood Avenue North to build a new $44 million multi-story 68,000 square foot facility. Well done Ajax. This is great news as I've been working with Grandview as an MPP and an Ajax Council since approximately 2005. I was honoured to be the presenter of the very first half million dollar capital grant check to them for redevelopment and programs in 2007. This past July our Ontario government through the Ministry of Child and Services agreed to provide $850,000 for critical building renewal projects. Grandview again from our provincial government. I am very pleased that our newly tabled budget includes many investments strategy for children and through the province as well as an investment of $333 million over five years in autism services and the Executive Director of Grandview Lorraine Sanctions man has spoken very highly of the investments the province is making. Thank you Mr. Speaker. Thank you. I thank all members for their statements. It's now time for report.