How to prove self-employment income

To prove self-employment income, you can utilize your annual tax return, bank statements, and profit/loss statements. For details on each of these ways you can prove self-employment income and one more, reference this guide:

• Utilize your annual tax return. This is the method that is the most credible and common way to prove your self-employment income.

  Tax returns are official documents from the IRS, so they are going to be recognized as legitimate documents to prove self-employment income by an individual or organization.

  If you are a freelancer, it is important to remember that your employer or client is required to send you a 1099 form when they have paid you over $600 in a single year. If they have paid you under $600 in a single year, then they are not required to provide you with a 1099 form.

  If your employer or client has paid you more than $600 in a single year and has not provided you with a 1099, you should contact the IRS. However, before taking this step, you should first try to contact the client or company to see if they can rectify the issue.

  Any employer who issues payment to you during an employment year is obligated to send you a 1099 by January 31st. There are different variations of a 1099 form, such as the 1099-DIV form for taxable dividend income and the 1099-MISC for payments to independent contractors.

  If you have contacted the company and they have refused to send you one or are just not responding, the IRS has given you options so you don't get penalized for this issue. You can contact the IRS using the phone number 800-829-1040.

  When you call the IRS you need to be ready to give your personal information, this includes your full name, address, Social Security number, the dates you were employed, and all of the contact information from the employer who failed to give you a 1099.

  The IRS will then contact your employer to remind them that they must send you a 1099.

  In the event your employer still does not send you a 1099 form, contact the IRS again, and they will send you a form 4852. This form is a substitute for W-2 forms and Form 1099-R.

  On a form 4852, you will find two sections where you can fill in the information on your W-2 or 1099. Question number nine asks you how you determined the amounts on the form. Question 10 asks you to explain the efforts you made to get your W-2 and 1099 forms.

  1099 forms are perfectly legitimate and perhaps the best way to prove your self-employment income.

• Bank Statements. This is your first best alternative to prove your self-employment income without a 1099 or other relevant tax documents.

  If you have a business bank account, it makes this option really simple because your business bank account will likely contain mostly payments made from clients and employers. These could be in the form of check deposits or direct deposits.

  However, if you don't have a business bank account and only use a personal bank account, you are going to have to highlight all of the relevant self-employment deposits you made into your personal bank account on its statement.

• Profit/Loss Statements. This refers to documentation showing your overall revenue, costs, and profits you have made from your self-employment work.

  As a freelancer, independent contractor, or self-employed individual you should track your income and expenses using profit and loss statements.

  This can not only help to prove your self-employment income, but can also help you to be more organized, make better business decisions, and enable growth within your work and business.

  You may enlist the help of an accountant to use this method or you can simply create your own profit and loss document using a spreadsheet format.

• Self-Employment Pay Stubs. You can always use any pay stubs you have obtained for your self-employment work as proof of income.

  Did you know you can also create your own self-employment pay stubs if none were provided to you by your employer or client? These can be useful for record-keeping and as proof of self-employment income.

  It's simple to use this method. You can create pay stubs by using a pay stub generator.

  Here is the information you must cover on a self-employed pay stub in order for it to be considered legal and valid:

  • Gross pay. This is the total amount of money you received for your self-employment services.

  • Deductions. This includes Social Security, Medicare, and state and local taxes. Remember, these items are not deducted automatically from your paycheck when you are self-employed, so you need to do the proper tax calculations when generating a pay stub.

  • Net pay. This is the final amount of self-employment money you have earned after subtracting the necessary deductions.