So, you’re self-employed! That pretty much means you’re free to earn money and leave the bureaucratic filings and claims to those that work for someone else, right?
Unfortunately, wrong. Self-employed individuals still have to be able to show proof of their income in a number of situations, and because these people work for themselves, it can be tricky to produce the right forms.
What is proof of income, when do you need it, and how can self-employed people get it? We’re going to discuss all of those ideas in this article, giving you some more tools for your self-employed arsenal.
Let’s get started:
What is Proof of Income?
We don’t often have to think about ways to prove our income, so many of us haven’t had to think about this question in a while.
Proof of income is essentially a verifiable way for agencies and companies to be sure that you earn a specific amount of money, allowing them to act accordingly from there. In most cases, this typically applies when you’re looking for a loan, trying to take care of your taxes, or if you’re signing up for insurance.
As someone who works for themselves, how can you prove your income without verified documents from your employer? Well, first, you can consider generating your own pay stub with this tool.
Having a pay stub is an excellent way to document your earnings, and just because you don’t have a boss doesn’t mean you can’t create your own. Additionally, having a pay stub generator is an excellent idea for those that wish to have employees.
Another surefire option is to refer to your bank statements. Identifying the money moving into your account or tallying up the deposits that you’ve put in over the year will be a great help.
Remember to look through all of your bank accounts if you have more than one. Many banks will tell you your monthly income in your statement, so it would be wise to collect your monthly bank statements and tally the deposits at the year’s end.
This will really speed up the process of combing through pages to find the numbers you’re looking for. Further, you can produce those statements as proof of the money you’ve earned.
Many self-employed people do freelancing work for other individuals or companies. In this case, you take on a little more responsibility. You are responsible for claiming any payment under $600 that occurs.
That also means that you have to get a receipt from the employer if you want to report your income. What’s nice, though, is that those employers are required to file a 1099 Form for you if you earn more than $600.
In other words, they provide an official document that states your earnings, eliminating the need for you to find any other way to prove that income.
Need More Help with Financial Logistics?
Understanding what is proof of income can be a little tricky when you go from employed to self-employed. Hopefully, this article provided a little help to you.
If you need more help dealing with changes in your finances and business, explore our site for the information you need.