How do other countries find out income and deductions for small businesses? For example: the cost of replacing the blade on a lawn mower. For a small business doing gardening that is a cost that needs to be deducted from their income. How would the government know to deduct this cost from the revenue and calculate out the tax?

Businesses typically do need to file. Individuals may have to report some of the deductables they want to claim.

E.g. in Finland employers deduct taxes directly from salaries. Also some capital gains taxes are directly deducted by banks etc, or at least the income is reported to the tax office. Yearly the tax office sends a prefilled report based on these. If you are fine with it, you don't have to do anything. If you want to add e.g. deductions, you add them on the tax office's website and it calculates the new report.

I've been getting taxable incomes for 25 years or so and I have never had to do any tax reporting.

The dumb thing about your Finland example vs the US is that all of that is also done in the US other than the prefilling.

Nit - as far as I know in US this standard deduction applies only to overall household income. It does not apply to Schedule C (aka small business tax return form). For Schedule C you really have to itemize what you spend your money on and keep receipts for some time in case of an audit.

This comment conflates several things and risks confusing others.

Schedule C (self-employment), which is a schedule you attach to your personal income tax return vs a business tax return (different depending on the type of business and what they're reporting) filed by the business.

Itemizing deductions (Schedule A) vs reporting/deducting expenses as part of a Schedule C as required by the IRS.

I mean, the grandparent also says that in Finland small businesses need to file

They don’t. You are liable for the full tax on earnings. It’s up to you to record any deductions or take credits to reduce it.

The overwhelming majority of any country takes a standard deduction and has no need for itemization of things the government would not know.

If you don't fall in that bucket or run a business, you tell them those things and send back the corrections form.

That's not a problem. You won't get into trouble for not declaring a deduction (in my jurisdiction, anyway).

They don't know your business income either of course and you do have to declare that, but most people have only income as an employee and they do know that figure, so most people don't need to "file" anything here. It's all automatic.

Over here it functions as follows:

When you're buying an item you declare you need an invoice on it and punch in your tax id.

Later, when you're filling your monthly taxes, you include that invoice in an XML file (plenty of generators available along with the free government-issued one), sign it with your digital ID and send that to the Ministry of Finance servers (MF servers for short). The MF servers then compare your entry to what all the people that sold you stuff entered.

This exists largely to prevent VAT manipulation, but at the same time gives all involved parties a clear, regular indicator that everything is fine in terms of taxes.

I'm a contractor and do this little dance every month using an accounting SaaS.

That's a special case and in most countries people are regular employees.

Gemini says 90% of the American workforce are employees.