The annual income and expense report for a business is a fundamental tool for self-employed workers, but it is crucial to understand that there is no single format applicable to all. The structure and content of this report varies significantly depending on the type of business activity carried out.
Not all expenses are the same. The deductibility of expenses is intrinsically linked to the nature of the business. A self-employed worker who is dedicated to consulting, for example, will have very different expenses than a self-employed person who owns a physical store. Deductible expenses for an independent professional may include training, while for a craftsman they could be specific materials or tools.
Each business is a world. It is essential that each self-employed worker understands which expenses are deductible according to their sector and activity. Expenses cannot be extrapolated from one type of business to another. Tax regulations establish specific criteria for each case, and it is vital to be adequately informed to avoid errors and possible sanctions.
The key is in specificity. A well-prepared annual income and expense report should accurately reflect the economic reality of each business. This involves correctly identifying and classifying the income and expenses that are specific to the activity in question.
Preparing a vehicle expense report is extremely important for self-employed individuals who use a vehicle for business purposes.
Warning:
Not all expenses are deductible for all self-employed individuals. Tax regulations establish specific criteria for each type of business and the direct relationship of the expense to the business activity. For example:
A self-employed professional who visits clients can deduct fuel and parking expenses, but not necessarily the expenses for drinks and snacks offered by drivers to their passengers.
A self-employed transporter can deduct maintenance and repair expenses, but not necessarily 100% of the expenses when the vehicle is used for both personal and business use.
That is why it is important to understand this, in addition to carrying and keeping documents that prove both the expenses and the miles traveled by the vehicle used for business purposes.