Annual Profit/Loss … Revenue/$Collected – Loss/Expenses = Profit/Income
Annual Income – Your take home pay
I’ll have to think of a ‘pretty’ way to explain this, but it’s basically your total Revenue (money collected) minus your Business Expenses (Loss) which leaves your Income (Profit). Being a business owner means paying a different income (there’s a youtube explaining this, I’d have to dig to find it).
W2 – Employees
Did you know you only pay 7.5% on taxes ? The company you work for pays the other 7.5% of your income tax. As a W2 employee, you get an automatic deduction of X(10k?) from your income tax. This deduction covers gas to and from work, any tools you might need for work like office supplies, and any uniforms you get. If your total expenses for your W2 work exceeds the X-limit, you can include that with your Annual taxes.