Self Employ - Business Model Change Over The Past 5 Years - Advice needed

[blade4sell]

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?

[blade4sell]

Sorry if my question is confusing? Let me try to break it down. 

First we buy finish product and sell it on eBay and Amazon. Of course smaller profit. We receive 1099K from eBay and Amazon. We file tax - business income. No wage (W2). Our income is lower because buy and selling a finish product.

Now we evolve to buy raw materials and making parts ourselves by hand. This yields a much higher profit since intensive labor needed. 

Would giving a monthly wage (W2) to ourselves make any difference? 

Reason I ask because if we file our taxes the same way (buying and selling a finish product) the 1099K amount does not reflect any labor added. It just looks like the Business is making much more money. Leaving out labor. 

any advice is appreciated,

[AnnetteB6]

If your business is a sole-proprietorship filing Schedule C as part of your personal tax return, you would not issue yourselves a W-2 for your labor.  Since you are the business, the higher profit from the business represents both the profit from the business and the profit you would pay yourself for your labor.  There is nothing you need to be doing differently because you cannot deduct a cost for labor that you perform yourself.

If you had another employee or contractor working for your business to perform some of the labor, then the amounts that you paid that person would be deducted as a business expense.