A Business Owned and Operated by the Spouses through a Limited Liability Company Does Not Qualify for the [Qualified Joint Venture] Election
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. See Rev. Proc. 2002-69, 2002-2 C.B. 831, for special rules applicable to married couple state law entities in community property states.
Rev. Proc. 2002-69 states that if the “qualified entity” (which includes the spousal LLC in a community property state): is treated by spouses as a disregarded entity for federal tax purposes, the IRS will accept that (and if it is treated as a partnership and files the appropriate partnership return that the IRS will accept that).
If the spousal LLC is treated by spouses as a disregarded entity, how do you include it on the married filing jointly tax return? Is income and self-employment tax split on to two Schedule Cs and Schedule SEs (as with a QJV) between the spouses? Does it go on one Schedule C and then self-employment tax is split between spouses on two Schedule SEs (if both spouses participate in the business)? Or does it go on one Schedule C and one Schedule SE (choosing one spouse or the other)?
Any clarification here would be very appreciated–searching extensively online yields all the answers above, but not much clarity on which is the correct answer (or if there are multiple correct answers).