Essential Information That You Should Know About Proof Of Income: Guide For Self-employed People

Are you worried about self-employed proof of income? If yes, then you should read this piece of writing to resolve the issue. According to the records, around 16 million people in the USA were considered self-employed. It means that all of these people need to provide their proof of income. So, if you are self-employed and your landlord, lender, or any other wants income proof, then it’s a regular thing. You can show the pay stub or paycheck as proof of income. There are many different ways through which you can prove your income. 

proof of income

What is proof of income?

Proof of income is a legal and verified document that shows how much you earn yearly, monthly, or biweekly. However, this document is beneficial when signing a deal with a landlord or any other person. Apart from this, you need proof of income to claim certain benefits. But here, the main question is what are the documents that can prove your income. So, here are documents that count as proof of payment. 

 

Tax returns Paystub New hire letter
Unemployed documents Court-ordered payments Pension statement
The social security award letter Worker’s compensation Disability insurance statement

 

It is vital to know how you can present these documents as proof of income. Some documents work better than others. So, here are the few key papers that can help prove the income in a less complicated way. 

Annual tax returns: 

A tax return is the first document that can come to your rescue. Thus, if you are working as a freelancer or self-employed, you will receive tax returns at the end of the year. It is one of the most reliable documents that work as proof of income. But it might be challenging to get the tax return once the season ends. Moreover, tax returns may not be 100% correct because you pay them once a year. So, we can’t match the authenticity of tax returns with a pay stub. 

Forms of income: 

If you are self-employed, many legal documents can work as proof of income. However, here are some of the forms that you can use as self-employed proof of payment. 

  • 1099-MISC tax form: It is an important form that shows another entity has paid you. However, you can combine these forms to show that 1099 independent contractors have received income from multiple sources. 
  • 1040 tax form: It is a form that certified accountants prepare to file the tax online. Thus, it can also work as self-employed proof of income. 

Apart from the above forms, the business manifest shows you are paying yourself. But don’t forget to attach a copy of your business license with the documents. 

Bank statements: 

It is another vital document that can work as self-employed proof of income. The bank statement entails the incoming and outgoing payments. Thus, you can use this statement to show the landlord or lender as proof of income. But if you have a combined business and personal account, you have to segregate between personal and business transactions. It is vital before presenting these records as proof of income. 

Profit & loss statement: 

Self-employed people enjoy the benefits of being their boss. The profit and loss statement is a detailed document that entails revenues, expenses, and costs. But along with this, it is vital to have a receipt and record of every transaction you are making. Thus, if you are self-employed, then you can easily use any software to create this statement. 

Use the pay stub and W-2 form: 

It’s always easier to use a proof of income document that you receive from the bank. Apart from this, you can use the 1099 or W-2 form to pay yourself. In this way, it will be easier to create the pay stub and show it as proof of income. Moreover, it is vital to have the letter written and signed by the company you are in the contract with. The individual clients write a statement where they mention the payable amount. 

Crux: 

We know that self-employed people enjoy the liberty of working hours. But Self-employed proof of income is an important thing that matters the most for your financial health. By having verified income sources, you will feel liberated and less frustrated. But to prove the income, you have to keep a constant record of the money you are earning. All of the documents mentioned above work as a helping hand to prove the income. As a result, you can make all other processes easier and smooth.