When you start a business as a sole proprietor or start a side job as a salaried worker, you are worried about the final tax return. Even if we know that double-entry bookkeeping for blue tax will result in tax savings, it seems that double-entry bookkeeping is very difficult to deal with, and some people may leave it as white tax return. Therefore, in this paper, we have summarized the basic mechanism of blue tax return in an easy-to-understand manner. We will introduce the merits and demerits of the blue tax return, the difference from the white tax return, the points to decide whether to use double-entry bookkeeping, and the flow from the notification of the blue tax return application to the submission of the final tax return. If you are uncertain about whether or not to file in blue, please refer to it. What is blue tax return?Blue tax return is to record daily income and expenses in a certain book defined by the system, calculate the income tax amount based on the contents and file a final tax return to the tax office and pay the income tax. It is a system. Even among blue taxpayers, if you make a certain level of entry and make a correct tax return based on that entry, you will receive a special tax exception. Books must be created according to the principle of regular bookkeeping, and the form of bookkeeping is defined as “single-way bookkeeping” (simple bookkeeping) or “double-entry bookkeeping”. The “certain level bookkeeping” that allows you to receive tax benefits is double-entry bookkeeping. As a general rule, the created books are required to be stored for 7 years. Let’s understand the mechanism of blue tax return.Conditions of people who can use blue tax return.Blue tax return is available for real estate income, business income, and forest income. The person who is delivering. If you open a new business after January 16th of that year, you must submit the “Blue Declaration Approval Application Form” within two months from the start of business. If you want to make a blue tax return for the first time after a few years have passed since you started business, you must submit the “blue tax return approval application form” by March 15 of that year. In order to make a blue return in 2020, it was necessary to submit a blue return approval application by March 15, 2020. If you can’t make it in time, you will be eligible for the blue tax return from the 2021 tax return. In order to use the blue tax return, you need to notify the chief of the tax office in charge in advance. Merits of the blue tax return The advantage of the blue tax return is, in a word, “save tax.” Here are 4 tax benefit you can get by reporting in blue. Let’s know the merit of blue tax return properly
You can receive a blue return special deduction
The most well-known tax benefit is that you can receive a blue tax deduction. To be eligible for the Blue Declaration Special Deduction, the following conditions must be met: Transactions are booked by regular bookkeeping (double-entry bookkeeping).A balance sheet and income statement are created based on the contents of the book entry and attached to the final tax return.By the legal deadline (basically March 15 The blue tax return special deduction to be submitted on weekdays was 650,000 yen until 2019 (Reiwa 1st year), but it will be 550,000 yen after 2020 (Rewa 2nd year). However, if any of the following conditions are met, 650,000 yen will be applied. Electronic journals and general ledger electronic bookkeeping Income tax final income tax return and blue tax return financial statements are submitted electronically by e-Tax by the electronic deadline If the blue tax return does not meet the special blue tax return deduction, the same as the white tax return You can only receive a special deduction of 100,000 yen.
Blue business full-time employee salary can be paid
Usually, if a family helps a business and pays for it, it is not recognized as an expense under the white tax return. However, if you make a blue return, you can declare the salary paid to your family as a necessary expense under the following conditions. A family member who has a living with the blue filer 15 years or older is devoted to the blue filer’s business (does not do any other work) Submit the “Notification Form for Blue Business Full-time Payroll” in advance A family member who has been paid the blue business full-time salary cannot be deducted from income.
Expected loss can be recorded as allowance for loan losses
If you are a blue filer who earns business income and you expect a loss due to a loan receivable or loan delinquency, you can record it as a loan loss allowance in the necessary expenses. The allowance for loan losses is allowed to be 5.5% or less of the total book value of loans as of the end of the year (3.3% as an exception in the case of the financial industry). This method is called “collective evaluation”. Apart from the collective valuation, you can also put the expected loss amount into the allowance for loan losses individually. This method is called individual evaluation. Loans processed by individual valuation must be deducted from the total book value for collective valuation.
Can carry forward and carry back net loss
Blue filers can carry forward and carry back their net losses. The condition to receive this privilege is when there is a loss in real estate income, business income, forest income, and even if the total profit and loss regulations are applied, the amount that can not be deducted still comes out. The loss amount can be carried over for 3 years from the following year and can be deducted from the income amount for each year. If you filed a blue tax in the previous year and are profitable, and the loss is likely to continue in the next blue tax, you can carry back this year’s net loss to the previous year. With a net loss carryback, you can get a refund from the income tax paid in the previous year. Whether you carry forward or carry back your net loss is up to you, depending on whether you will continue to operate in the following year or not, and the circumstances prevailing at that time. Disadvantages of blue tax return Although there are many advantages in terms of tax savings, there are also two disadvantages. Let’s see what the disadvantages are. Let’s know the disadvantages of blue tax return properly
Bookkeeping takes time
The reason why many people are discouraged from receiving the blue tax special deduction is the complexity of bookkeeping. In particular, it is time-consuming and labor-intensive for people who have no knowledge of accounting to do double-entry bookkeeping, so there are many people who are frustrated and leave a white declaration.
Many required documents
When making a final tax return with a blue tax return using a book entry that follows the principles of regular bookkeeping, more documents are required than with a white tax return. In daily accounting, cash accounting book, accounts receivable, accounts payable, expense book, fixed asset ledger. At the end of the year, you have to create a balance sheet and income statement based on these documents. You are also obliged to store documents that arise from your daily transactions, such as invoices, quotations, invoices and invoices. Difference between blue and white tax returns The blue tax returns we have seen so far, but what is the specific difference from white tax returns? In addition to the case of deducting 100,000 yen and the case of deducting 550,000 yen in the blue declaration, we compared the three patterns. Let’s check the difference between the blue declaration and the white declaration Comparison item White declaration Blue declaration
100,000 yen deduction Blue tax return
550,000 yen deduction * No procedure required Notification of opening
Blue Declaration Approval Application Form Business Notification
Blue Declaration Approval application bookkeeping method Simple method bookkeeping Single-entry bookkeeping Double-entry bookkeeping For final tax return
Required Documents-Tax Return B-Tax Return B
・Blue return financial statements
(There is no obligation to create a balance sheet) ・Filing tax return B
・Blue tax return financial statement preparation book Simple entry book ・Cash account book
・ Accounts payable
・Fixed asset register
・Expense book ・General account book
・ Accounts payable
・Fixed asset register
Other necessary books can be received
Special deduction amount 100,000 yen 100,000 yen 550,000 yen
(650,000 yen if certain conditions are met) Blue Business full-time employee salary deduction No Yes Yes Loss carry forward
Carry back No Yes Yes Yes *650,000 yen until 1st year of Reiwa, 550,000 yen from final tax return of 2nd year of Reiwa In the case of white tax return, there are few tax benefits, but the book to create is simple There is no problem with it, and the burden of bookkeeping is the least. When using single-entry bookkeeping, the entry method is simple, but the deduction amount is as low as 100,000 yen. Single-entry bookkeeping is also available for deducting full-time employee salaries and carrying forward/backing losses. Judgment Points for Making a Blue Declaration The judgment point for making a blue declaration is whether or not you can enjoy the benefits of the blue declaration. We will introduce 4 judgment points, so please refer to them when you consider whether or not to declare blue. Let’s learn the judgment points of whether to make a blue tax return
Whether the deficit is expected to continue
When you’re just starting a business, it’s common for you to get no profit. If you are still in the red, you can carry forward or carry back your net loss. Net loss carry-forward or carry-back can be used even if you do not support double-entry bookkeeping, so submit a blue return approval application to the tax office.
Whether the business will continue for a long time to come
If you continue your business for a long time, you will start to make profits. There is a considerable difference in tax burden every year, depending on whether there is a tax-saving effect that can be received by filing a blue tax return. Moreover, not only taxes but also the burden of health insurance will increase, so the actual difference will widen. If you want to continue your business in the future, consider making a double-entry book entry with a blue return and making the most of your tax benefits.
Whether to give a salary to the family
If you want to give your family a salary, consider a blue tax return that allows you to receive a blue business full-time payroll deduction. The blue business full-time employee salary deduction is a benefit that can be used even if you do not support double-entry bookkeeping, as well as carry forward or carry back of net loss. However, it will take time and effort to submit the “Notification Form Regarding Full-time Pay for Blue Business” in advance.
Whether double-entry bookkeeping is possible
We often hear that “double-entry bookkeeping is difficult for blue tax returns,” but we can’t tell if it is really difficult without trying it. In fact, there are cases in which a person who had no previous knowledge of accounting makes double-entry bookkeeping and declares blue. Try double-entry bookkeeping and see if you can do it yourself. Even if you just can’t seem to book yourself, consider other methods such as outsourcing. Correspondence method when double-entry bookkeeping of blue tax return is difficult In order to take full advantage of blue tax return, double-entry bookkeeping is required. Here are some solutions for people who just can’t handle it, so check to see if you can do it yourself. What should I do when it is difficult to double-track bookkeeping for blue returns?
Bookkeeping with accounting software
Accounting software saves a lot of time and effort in bookkeeping and bookkeeping. It is also possible to manually enter daily transactions and automatically capture the movements of banks and credit cards through data linkage. Required books are automatically generated based on the input data. If you find an error in the books, just correct the data. Since it is automatically reflected in all books, accounting process can be considerably reduced.
Ask a specialist about how to write and how to write at a blue tax return
If you are just starting bookkeeping with double-entry bookkeeping, you may not be able to understand even a single word, and it may be difficult to proceed. In this case, enrolling in a local blue tax return is also a recommended method. At the Blue Tax Return, you will be able to answer all questions such as how to book, how to write, and how to journal.
If it is difficult for you, entrust the account book to a tax accountant
If you are not confident in using accounting software, you can also outsource the bookkeeping to a tax accountant by crowdsourcing or a blue tax return. Please consider the trade-off between the cost of outsourcing and the time and effort to book yourself. Flow from filing a blue tax return to filing a final tax return Before submitting a blue tax return for final tax return, you need to take the necessary steps. We will explain the flow from filing a blue tax return to submitting the final tax return, so let’s proceed with the procedure in order. Let’s check the flow from filing a blue tax return to submitting the final tax return
Notification of opening of business and application for blue return approval to the tax office of the tax payment area
First, submit the business opening notification and the blue return approval application to the tax office of the tax payment area. As a general rule, the deadline for filing a blue return approval application is until March 15th of that year. After March 16th, you can file a blue tax return from the year following that year. The application format is provided within the tax office, so you can take it home, fill it out at home, and take it with you. However, if the tax office is far away, it is more efficient to ask the tax office on the spot and create and submit it all at once. Since there is a part to enter the bookkeeping method in the blue return approval application, please select either “double bookkeeping” or “simple bookkeeping”. If you have checked the double-entry bookkeeping, check the following documents as required documents. Cash account accounts receivable book Accounts payable Expense book Fixed asset ledger Deposit account book General account ledger journal Simple bookkeeping, you only need to check the cash account book.
Start bookkeeping with the selected method
Start bookkeeping in the selected method. Check the bookkeeping method on the Internet and select the accounting software that suits you best before you start bookkeeping.
Submit a tax return by blue tax return by March 15 of the following year
After the end of the year, you will be able to compile the entries for one year and create each book, balance sheet, income statement, and even tax return. Make a tax return by March 15th of the following year and submit it using one of the following methods. To bring the full amount of 650,000 yen to the blue tax special deduction from the final tax return in 2020 (2 years Reiwa), bring the tax return directly to the tax office by e-TAX electronically Electronic filing with e-TAX is required. It will be 550,000 yen for other filing methods, so be careful when listing the amount when making a tax return. Blue return is a system with many advantages for sole proprietors Blue return is a system with many tax advantages for sole proprietors. Reporting to the tax office and daily bookkeeping are time-consuming, but there are advantages. However, if the bookkeeping is so painful that it interferes with your main business, you may decide to leave it as white. If only double entry bookkeeping is a barrier to blue filing, consider outsourcing bookkeeping. Compare the benefits of blue filing with the cost of outsourcing and file a tax return in a way that is better for you.