Maybe you need to rent a new apartment? Perhaps you’re trying to buy a car? Whatever the case may be, you have a need to prove income for self-employment. The question is: how do you prove income if you’re self-employed? Great question! We’re going to answer it in detail below.
Show Your Last Year’s Tax Return
The best way to prove your self-employment income is to show your last year’s tax return. This will indicate just how much self-employment income you have in a year and will help to show that you have a firm financial footing.
Note that if you’re trying to obtain a mortgage for a house, you’ll likely need 2 tax returns. The mortgage lender will take the average of your income on these two tax returns to decide how much money you can take out.
It’s also important to note that deducting expenses from your total revenue will lower your total income. This can hurt you if you’re trying to obtain a large loan (like a mortgage).
Collect Your Bank Statements
If you’re trying to finance a car or rent an apartment, you can likely make do by showing your last few bank statements. These can, more or less, help show how much money you’re bringing in on a weekly or monthly basis.
You may need 3 bank statements, 6, or even 9 or more. The exact number needed is dependent on what the authorizer asks for.
Make a Profit and Loss Statement
Profit and loss statements are beneficial because they indicate just what type of expenses are being taken out of your total revenue. Many authorizers will be interested in these figures, as they help indicate just how much money you’re really bringing in.
You can make profit and loss statements in an Excel spreadsheet, notebook, or with specialized software. Note that to validate them, it’s good to accompany them with pay stubs. So, consider making paystubs with the help of this pay stub example.
Pay Everything Upfront
If you don’t want to go through the trouble of proving your income, you could just pay the full extent of debts upfront. No authorizer is going to turn down money that has already been presented.
Of course, this isn’t a viable option for most situations. After all, most people don’t have hundreds of thousands of dollars stashed away in a savings account.
However, do note that paying a portion of your debts upfront could also help to secure financing (or an apartment, for instance).
It’s Possible to Prove Income as a Self-Employed Worker
Regardless of the situation that you find yourself in, it’s always possible to prove income as a self-employed worker. So, follow the tips reviewed above and you should be good to go.
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