My spouse and I started a small business 5 years ago, self employ selling on eBay and Amazon. We started off by buying and selling parts for profit. Minimum labor needed. Then slowly our business evolve to hand made parts, buying raw materials and making parts ourselves selling on Etsy, eBay and Amazon. Should we change the way we calculate expense? Meaning paying ourselves a wage (W2) since so much more labor is needed to produce a part by hand. It's a lot different compared to when we first started?
When we file our last return, it feels like we left something out like labor? Since raw material cost is much lower compared to buying and selling a finish part. Buying raw material then add handmade labor will definitely yield a greater profit. But if we keep filing tax the same method like when we first started - business income? It feels like something is missing? Would issuing a minimum wage to ourselves help?
Any advice is appreciated?
