It depends.
If you and your wife file a joint tax return, than the portion of the total payments retained by either of you is your combined taxable income.
You may receive multiple Forms 1099-K from multiple PayPal accounts showing the gross amounts of the transactions and will need to show the disbursements to the individuals funds were collected for so you are only paying tax on your net taxable income.
If you file separate tax returns. you would each file using Married Filing Separate filing status.
You would report your income from your Form 1099-K Paypal account and show as expenses the transfers through Western Union you make to reduce the amount to only your net taxable income.
