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,
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.
**Mark the post that answers your question by clicking on "Mark as Best Answer"