What are the different income and expense categories available?

The information below includes both the income and expense categories available on both the mobile and web apps. Customers can use these categories to properly categorize any income or any expense received or made using their Lili account.*

Transactions that are categorized will be included in the reports (Expenses report, Profit and Loss, Cash Flows, Schedule C) and therefore Lili highly recommends categorizing the transactions right away, in order to keep your data up to date.

Income Categories

Category Definition
Debt Proceeds Income received as related to borrowed money, such as commissions.
Interest Income received from investments that pay interest, such as a savings account.
Nonbusiness Income Choosing this category will exclude the income transaction from all accounting reports
Other Income Income received from activities that are unrelated to the core activity of a business.
Payroll Income received as an employee of a business other than your own. Note: this is not reflected in the accounting reports.
Sales Income received from the sale of goods.
Services Income received from the provision of services.
Tax Return Income received from the United States Government as a result of your tax return. Note: this is not reflected in the accounting reports.



Expense Categories

Category Definition
Advertising Payments made for the purpose of advertising, publicizing, or promoting your business or to acquire or retain client are deductible, provided they are ordinary, necessary, reasonable, and directly relate to your business activities.
Bank Charges Bank charges made by Lili will be automatically categorized.
Business Insurance Deduct premiums paid for business insurance.
Car Expenses You can deduct the actual expenses of operating your car or truck or take the standard mileage rate. This is true even if you used your vehicle for hire (such as a taxicab). You must use actual expenses, if you used five or more vehicles simultaneously in your business (such as in fleet operations). You cannot use actual expenses for a leased vehicle if you previously used the standard mileage rate for that vehicle.
Charitable Donations You can deduct charitable contributions of money or property made to any organization that is qualified under section 170(c) of the Internal Revenue Code. Generally, you can deduct up to 50 percent of your adjusted gross income, but 20 percent and 30 percent limitations apply in some cases.
Commissions and Fees

Sales Employee: May receive a sales commission, usually in addition to base pay, for meeting or exceeding a specific sales target in a specific period of time. This commission may be a percentage of sales or a percentage of a base amount of sales.

Insurance Agent: Typically, an independent agent or non-employee agent makes a commission on the sale of an insurance policy. The amount of commission varies based on the type and amount of the policy. 

Real Estate Agents: Receive commissions on the sale of a property. Typically, these agents are not employees of a company.
Contract Labor Enter the total cost of contract labor for the tax year. Contract labor includes payments to persons you do not treat as employees (for example, independent contractors) for services performed for your trade or business.
Cost of Goods Sold The cost of goods sold (GOGS) is the sum of all direct costs associated with making a product. It appears on an income statement and typically includes money spent on raw materials and labor. It does not include costs associated with marketing, sales or distribution.
Credit Card

Use this category when paying credit card charges from your Lili account. Since Lili doesn't have the specific transactions linked to this charge, it won't be listed in the Profit and Loss report or Schedule C Form. It will be included in the Expense report under the expenses section. 

Debt Payment - Interest

Interest is the money you pay in order to borrow money, and interest payments are made in addition to paying back the principal of the loan.

In regards to taxes, you can deduct certain types of interest expenses, including interest related to business expenses, investment interest, qualified mortgage interest, outstanding student loan interest, non-farm business interest, farm business interest.

The IRS does not allow deductions for personal interest, including interest on credit cards or car loans.

Debt Payment - Principal The principal is the amount of money borrowed in a loan. Any payment towards the principal is applied after any outstanding fees and interest payments are covered.
Dues and Subscriptions Any money you pay for commissions are deductible. You can also deduct any membership dues you pay for trade associations and fees for subscriptions to trade publications.
Employee Benefits Deduct contributions to employee benefit programs that are not an incidental part of a pension or profit-sharing plan included on line 19. Examples are accident and health plans, group-term life insurance, and dependent care assistance programs. If you made contributions on your behalf as a self-employed person to a dependent care assistance program, complete Form 2441, Parts I and III, to figure your deductible contributions to that program. You cannot deduct contributions you made on your behalf as a self-employed person for group-term life insurance.
Income Tax Payment made to the IRS.
Legal / Professional Services Legal and professional fees that are “ordinary and necessary” expenses are deductible. These legal or professional fees can be divided into startup costs and organizational costs. Startup costs refer to legal fees related to actually starting or purchasing a business, like registrations fees, and organizational costs refer to legal fees related to organizing a business before the end of the first tax year.
Meals This includes expenses for meals while traveling away from home for business. Your deductible business meal expenses are a percentage of your actual business meal expenses or standard meal allowance.
Mortgage Interest

Be careful with this one. This line on Schedule C is if the sole prop has a mortgage on an office building they own. 

This can be confusing for the average taxpayer because they may think of this line item as the mortgage on their personal residence that they may also use as a home office. If they are taking the home office deduction, they'll need to complete Form 8829, which will then flow through to Line 30 on Schedule C.

Office Expenses Costs related to the operation of a business, such as office phones, computers, software, or website services.
Office Utilities We need to make it clear that utilities are for a dedicated office building (not for a personal residence that is used for an office). All expenses related to business use of a personal residence are included on Form 8829.
Other Expenses Costs that are not related to the main business operations, such as rent, taxes, repairs and losses from the sale of assets.
Payroll To be more accurate with your payroll transaction, you can use these specific categories depending on the nature of the transaction. If the transaction is tax related, choose the Payroll Tax option. Otherwise, if it is simply payroll related, choose either the Payroll or Payroll Wage category. 
Payroll Wage
Payroll Tax
Pension / Retirement Enter your deduction for the contributions you made for the benefit of your employees to a pension, profit-sharing, or annuity plan (including SEP, SIMPLE, and SARSEP plans described in Pub. 560). If the plan included you as a self-employed person, enter the contributions made as an employer on your behalf on Schedule 1 (Form 1040), line 16, not on Schedule C.
Promotional Marketing

Advertising

  • Advertising in newspapers and magazines, and on TV or online
  • Direct marketing
  • Sponsorship of sports teams and creating promotional items like mugs, hats, T-shirts, or pens
  • Email newsletters, pay-per-click advertising, and SEO services
  • Advertising materials like business cards, brochures, and web pages
  • Advertising events such as a publicity campaign or special promotional event
Rent or Lease If you rented or leased vehicles, machinery, or equipment, enter on line 20a the business portion of your rental cost. But if you leased a vehicle for a term of 30 days or more, you may have to reduce your deduction by an amount called the inclusion amount.
Rent or Lease - Equipment A type of financing that enables you to use equipment for a defined period of time without purchasing it. This expense can be deducted as rent, as long as the lease is not a conditional sales contract (in which you are paying towards eventual purchase of the equipment).
Repairs and Maintenance Deduct the cost of incidental repairs and maintenance that do not add to the property's value or appreciably prolong its life. Do not deduct the value of your own labor. Do not deduct amounts spent to restore or replace property; they must be capitalized.
Supplies

In most cases, you can deduct the cost of materials and supplies only to the extent you actually consumed and used them in your business during the tax year (unless you deducted them in a prior tax year).

However, if you had incidental materials and supplies on hand for which you kept no inventories or records of use, you can deduct the cost of those you actually purchased during the tax year, provided that method clearly reflects income. You can also deduct the cost of books, professional instruments, equipment, etc., if you normally use them within a year. However, if their usefulness extends substantially beyond a year, you must generally recover their costs through depreciation.

Taxes / Licenses

You can deduct the following taxes and licenses on this line.

  • State and local sales taxes imposed on you as the seller of goods or services. If you collected this tax from the buyer, you must also include the amount collected in gross receipts or sales on line 1.
  • Real estate and personal property taxes on business assets.
  • Licenses and regulatory fees for your trade or business paid each year to state or local governments. But some licenses, such as liquor licenses, may have to be amortized. See chapter 8 of Pub. 535 for details.
  • Social security and Medicare taxes paid to match required withholding from your employees’ wages. Reduce your deduction by the amount shown on Form 8846, line 4.
  • Federal unemployment tax paid.
  • Federal highway use tax.
  • Contributions to a state unemployment insurance fund or disability benefit fund if they are considered taxes under state law. Do not deduct the following.
  • Federal income taxes, including your self-employment tax. However, you can deduct one-half of your self-employment tax on Schedule 1 (Form 1040), line 15 (but if filing Form 1040-NR, then only when covered under the U.S. social security system due to an international social security agreement).
  • Estate and gift taxes.
  • Taxes assessed to pay for improvements, such as paving and sewers.
  • Taxes on your home or personal use property.
  • State and local sales taxes on property purchased for use in your business. Instead, treat these taxes as part of the cost of the property.
  • State and local sales taxes imposed on the buyer that you were required to collect and pay over to state or local governments. These taxes are not included in gross receipts or sales nor are they a deductible expense. However, if the state or local government allowed you to retain any part of the sales tax you collected, you must include that amount as income on line 6.
  • Other taxes and licenses
Travel Enter your expenses for lodging and transportation connected with overnight travel for business while away from your tax home. In most cases, your tax home is your main place of business, regardless of where you maintain your family home. You cannot deduct expenses paid or incurred in connection with employment away from home if that period of employment exceeds 1 year. Also, you cannot deduct travel expenses for your spouse, your dependent, or any other individual unless that person is your employee, the travel is for a bonafide business purpose, and the expenses would otherwise be deductible by that person. Do not include expenses for meals on this line. Instead, see Line 24b, later. Do not include entertainment expenses on this line.


* Subject to the customer's specific Lili plan. Please refer to Lili's plan comparison table to see which plans support the expense categories and which plans support the income categories. 

 

Lili is a technology company and not a bank. Banking services are provided by Choice Financial Group, Member FDIC. The Lili Visa® Business Debit Card is issued by Choice Financial Group, Member FDIC, pursuant to a license from Visa U.S.A.