Income Solution: How to Show Proof of Income When You’re Self-Employed

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More than 16 million Americans are self-employed. If you’re one of the millions who are part of the “be your own boss” brigade, you know the freedom that comes with charting your own career path. However, that freedom can be a double-edged sword when it comes time to show proof of income.

Many situations require documents for income proof, such as renting an apartment or applying for a loan. Self-employed people do not receive a typical earnings statement from an employer. Read on and learn the self-employment income solution that will provide you with the documents you need to prove your income.

1Bank Statements

If you need to know how to prove income when you’re self-employed, you can start with your bank statements. Most banks have a website that allows you to download copies of your monthly activities. These downloads will show all your deposits – or income.

You’ll need at least three months of bank statements for most situations. Depending on the type of work you do, your monthly income may change significantly each month. Download and print out 12 months of bank statements to show your income over a year’s time.

2Tax Returns

Each year, you file a tax return to pay your federal income taxes. This document is an excellent way to show self-employment proof of income. It’s a legal document, and it shows a year’s worth of income.

Most online tax preparation software saves a copy of your previous year’s tax return. If you didn’t prepare the return yourself, check with your accountant or tax preparer to get a copy.

3Pay Yourself

Even if you’re a sole proprietor, you can run your business as if you’re an employee. Complete a W-2 form, and write yourself a check each week. This will give you the documentation you need to show proof of income.

It’s important to understand the tax implications of this approach. Check with your business advisor or accountant to make sure this is the right way to go.

4Other Income Solution Documents

If your bank statements are difficult to retrieve, or if you don’t know where your last tax return is, there are other options. One is an online pay stub generator to ease your payroll processes. Companies use this service to generate earnings statements for employees, but you can use it to create a freelance income statement.

You fill out a simple form, and it generates a professional-looking document with your deductions, withholdings information, and more. In many cases, these documents are all you need to demonstrate your monthly income.

The Proof You Need

Self-employment is a rewarding experience. You make your own decisions, and you have the flexibility to set your own hours. But sometimes, you’ll need an income solution that shows how much money you’ve earned.

Bank statements and tax returns can provide proof of income for most situations, like showing a prospective landlord you will be able to pay rent each month. If you need something more substantial, you can pay yourself as an employee or use a pay stub generator online to show your monthly income.

For more business-related ideas and tips, please explore the rest of our site.

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