Self-employment comes with many advantages like enjoying a flexible work schedule and doing what you love most. However, getting proof of income can be a bit challenging for those who are self-employed. It is necessary to show proof of revenue for insurance, tax law, and loan purposes. Proving your income is not that daunting as some people would like to believe. Read on to learn how self-employed workers can verify their proof of income.
Why Do You Need Proof of Income?
Proof of income is a document that shows the amount of money you earn per month or within a specific period. In one way or the other, you would need to prove your source of revenue if you want to obtain a loan. Lenders use your income to determine if you are capable of repaying the money. The amount you earn also determines the type of loan. If you want insurance, your income determines the type of policy that is appropriate for you. Additionally, landlords also use proof of income to screen potential tenants based on their capability to pay the monthly rent.
Bank Statements
If you are self-employed, you can use your bank statement as proof of your income. Your statement should show a steady flow of deposits into your account. It is important to separate your business account from personal expenses since this can compromise the authenticity of your revenue statement. Your self-employment pay stubs also help show a stable flow of revenue on your bank statement. A pay stub generator makes this process easier.
Your Annual Tax Returns
Every business must pay tax to the IRS as stated by the law. For those who operate small businesses, they may prove their income as reported on their Schedule C tax form. The form outlines your gross revenue, money received from purchases by different customers, and the money that remains after subtracting all the business expenses. You need to keep a record of your previous year’s return forms. Since you submit a Schedule C tax document, to the IRS, it acts as proof of income for self-employment.
Additionally, the wage and tax statement form 1099 for the self-employed proves your income for individuals who run their businesses. From the wages statement, you can also calculate your pay stubs to use when applying for a loan. Expert financial consultants at https://www.mrpaystubs.com/ explain that you can generate your pay stubs using the wage and tax statement showing the revenue that your business generates. A tax return form is another reliable document to prove your income. This is a legal document that shows that you earn money from your business operations.
Profit and Loss Statements
Self-employed persons can also use their profit and loss statements to prove their income for different purposes. You should prepare these income statements well to reflect the true financial position of your business. Each statement must include income, business expenses, and deposits for the year. You should also have matching dates on your bank statement and profit and loss statement. There are independent companies that can help you prepare professional income statements if the task is challenging.
Your ledger documents also outline the financial status of your business which can help the lenders to make an informed decision if you want a business loan. There are free and paid software solutions that can help you keep track of your finances in business. Your profit and loss statement should be verifiable by independent auditors. Therefore, make sure that it contains correct information about your business.
As you can see, there are different types of documents that act as proof of income. All the copies that you use to prove your revenue should contain the following information:
- Your full name
- Income amount
- Social security number
- Date
- Employer name
It is vital to obtain the documents with your latest financial information if you want your loan application to be approved quickly.
Self-employment is one of the amazing ways to earn a living as your boss. However, what can dampen this exciting experience relates to proving your income for the loan, insurance, or other purposes. Showing proof of revenue when you are self-employed is much easier than many people would think. Your bank statement, tax return, and income statement are credible documents that you can use to prove your source of money. These documents reflect your financial status that is used by the lenders or insurance companies to determine the packages that suit you. Without proof of payment, it may be impossible to get a loan or the right policy that you need.