Why does the Tax Report not show your net profit?
Flipwise helps you prepare your taxes by allowing you to log and track your reselling data, but it is not tax software. Flipwise does not offer tax advice and this article should not be considered tax advice. We strongly recommend that you consult with a professional tax advisor when preparing your tax return.
The Flipwise Tax Report includes all of the core financial data required to prepare your tax return.
It is built for tax compliance, not performance analysis. (The Income Statement is built for performance analysis.)
Two considerations drive our decision not to display a “net profit” figure on the Tax Report:
- Inventory costs
- Non-cash expenses
For inventory costs, the Tax Report report provides four key metrics:
- Beginning inventory value
- Ending inventory value
- Spent on new inventory
- Cost of Goods Sold (COGS)
Inventory is treated separately from regular income and expense items for tax purposes due to there being different inventory accounting methods: cash and accrual. Flipwise does not assume which accounting method you use. Instead, we provide the underlying inventory data for both so you or your tax professional can apply the appropriate method when preparing your return. Showing a net profit on the Tax Report would require assuming a particular inventory accounting method, which may not reflect how you actually file.
The second consideration is non-cash expenses. The Tax Report includes deductible items such as logged mileage and home office square footage from the Ledger. These are legitimate tax deductions and must appear on a tax report, but they are not cash outflows in the traditional sense in that you don't actually pay for them. If Flipwise were to calculate a “net profit” on your Tax Report using these figures, it would not reflect true operational performance because those deductions reduce taxable income without reducing cash.
For users who want to understand how their business is performing operationally, the Income Statement is designed for that purpose. It excludes non-cash expenses and presents revenue, cash expenses, and inventory costs in a way that reflects actual business performance rather than tax positioning.