Either way. Or you can increase your W2 withholding to cover her self employment tax. You should try to pay estimates during the year. If you end up owing too much when you file your tax return there will be a penalty.
Self Employment tax (Scheduled SE) is automatically generated if a person has $400 or more of net profit from self-employment. You pay 15.3% SE tax on 92.35% of your Net Profit (If it is greater than $400). The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare (FICA). So you get social security credit for it when you retire. It is in addition to any regular income tax you owe on it. Plus state tax.
