Blue vs white declaration: deduction sizes, deadlines, and bookkeeping requirements

The white declaration form (白色申告) gives a minimal deduction of 100,000 yen without strict bookkeeping requirements — a simple expense log by receipt is enough, no double-entry bookkeeping needed. The blue form (青色申告) gives a deduction of up to 650,000 yen when filed via e-Tax with double-entry bookkeeping, or 550,000 yen for paper filing without e-Tax; with less rigorous bookkeeping the deduction is closer to 100,000+ yen depending on the bookkeeping level (the chat described a 100,000-650,000 yen range). Receipts and supporting documents must be kept — 5 and 7 years were both mentioned; per official NTA data, most documents must be kept 7 years, some for 5 years; for accounting records generally, participants recommend keeping them 10 years, which is also the statute of limitations for tax crimes in Japan. Switching to the blue form does not affect the right to deduct business expenses (経費) — expense deductions are available on the white form too; the blue form's real advantage lies elsewhere: a larger standard deduction and extra benefits such as offsetting a loss against salary income and carrying losses forward. Deadline to switch to the blue form: March 15 of the current tax year if already operating — miss it and the blue form and its larger deduction only apply from the following year; when starting a new sole proprietorship, the business-opening notice (開業届) can be filed any time, but the blue-form application must be filed within 2 months of starting the business. The blue form requires bookkeeping in a specific format set by law — it is not a place for an arbitrary "whatever is convenient" method; the white form has almost no format requirements. Finally, the 650,000 yen blue-form deduction applies only to sole proprietors (個人事業主); it does not extend to a KK (株式会社), which is taxed under an entirely different corporate system. Beyond the deduction size, blue filing carries a few more concrete advantages over white filing: business losses can be carried forward up to 3 years (not available at all on the white form); wages paid to family members working in the business are fully deductible under blue filing, whereas white filing caps them at fixed amounts; small depreciable assets under 300,000 yen can be expensed in full in the year of purchase under blue filing (capped at 3 million yen per year), against a much lower 100,000 yen threshold on white filing; and blue filing allows a deductible reserve for bad debts, which white filing does not. A simple way to decide: if there's no business or real estate income at all, white filing is the only option; under roughly 3 million yen of revenue with no growth plans, white filing may still be simplest; but having family members working in the business, being able to do double-entry bookkeeping, or being willing to learn it or hire an accountant all point toward switching to blue filing, even starting simple and upgrading the bookkeeping level later. A 2022 NTA guidance revision also matters here: properly maintained books create a presumption of business income regardless of which filing method is used, whereas without proper records and under about 3 million yen of revenue, income risks being reclassified as miscellaneous income rather than business income — which affects available deductions either way.