Husband and Wife on Ebay

June--

I am from Binghamton, NY and I work full time a database analyst for a major corporation in NY, and my wife is a housewife and full time student and she doesn't work.

In Jan. 2006, I started selling crystal and china on ebay, and I got a EIN so I could buy these products from the manufacturer direct. I do all the work with the ebay business like placing all the ads, taking all the photos, ordering the products, answering all the questions from customers, keeping track of all the money and accounting, paying the state sales taxes quarterly, etc. The only work my wife does is spends about a hour a night helping me pack the products for shipment.

In 2006, I netted an additional $33,000 from the ebay sales, and I filed a joint return with a Schedule C with me as the sole proprietor, and Schedule SE to pay any self employment taxes for the additional earned income.

I did not include my wife as a partner or employee.

My question is, with the new Small Business and Work Opportunity Tax Act of 2007, can I still continue to file as a sole proprietor and not include my wife as a partner or employee without any problems from the IRS?

-- Charles


Dear Charles,

No, there's is nothing in the Small Business and Work Opportunity Tax Act of 2007 that says you must partner or employ your spouse. So many indies are confused about this new tax act that a couple weeks ago I wrote a column explaining some of its ins and outs. Here's the post The Many Advantages of Hiring Your Spouse . I suggest you read it.

In that post and in several other posts on hiring your spouse you will find that there are many advantages to putting your wife on your payroll, even if she works for you only 5 to 10 hours per week.

BTW -- great work on Ebay!
-- June