There are many situations where you need to prove income, but what if you’re self-employed? This guide explains how to show proof of income when self-employed. If you’re wondering how to show proof of income when self-employed, you’re not alone in this inquiry.
In fact, studies have revealed that nearly 30% of American adults now work for themselves. While being self-employed carries a number of incredible benefits, it can prove to be difficult when proving your income.
To help, we’re sharing five ways to prove your income when you’re self-employed. With this, you’ll have no trouble validating your income and proving yourself as a reliable source.
In being self-employed, you’re going to be asked to supply last year’s tax documents. This will showcase all sources of your income in one convenient document. This is why keeping a physical copy of your tax documents year-over-year is so important. This is also a great way to showcase the growth of your business over time.
Generally speaking, pay stubs are one of the most simple and effective ways to prove your income. With this, you’ll generally be asked to provide a series of pay stubs rather than a single pay stub. With this, the idea is to prove that your income is stable and that it will remain consistent over time. Not sure how to create a Pay Stub? Do yourself a favor and use this incredibly simple pay stubs maker!
Profit and Loss Statement
In addition to tax documents and pay stubs, you may be asked to supply a profit and loss statement for your business. This is an overall summary of your costs and your expenses. It also tracks your revenue and makes it easy to understand your income throughout different periods of time. When we consider that 46% of self-employed individuals struggle with the financial management of their business, it’s clear that this is a common issue.
Having a profit and loss statement will allow you to understand the financial scope of your business. It will also help you to plan ahead and outline where you need to improve.
Short and sweet, you’ll likely be asked to provide a bank statement. This will highlight the monies that you have in different areas of your bank account. This is especially handy for new businesses that don’t have years of income to prove their validity.
Some lenders may also want to see the deposits that are going into your bank account. This will showcase that your business is, in fact, making the income that you’ve claimed.
Invoices and Client Contracts
At the end of the day, sharing your invoices and client contacts will always help to verify your income. This goes to show that you have both active clients and future income coming your way. While these documents may not be enough on their own, they’re a great addition to verifying your income.
Understanding How to Show Proof of Income When Self-Employed, Whether you’re applying for a mortgage or a new credit card, you’re going to be required to show proof of income.
Unfortunately, understanding how to show proof of income when self-employed isn’t always a straightforward task. If you’re feeling confused, allow this guide to provide some clarity. Did you learn something new in this article? If so, be sure to check back with us again!