Get Proof of Earnings for a Self Employed Person

It isn't as easy to provide proof of earnings if you are self-employed as you don't necessarily have regular pay stubs or W-2 forms to provide as evidence of income. The most common reasons you would need to provide proof of income involve obtaining a mortgage, rental property, personal or vehicle loan, or certain types of business credit. However, there are some documents that you can provide to show your income if you are self-employed.

Steps

Applying for Financing

1. Know what lenders and creditors are looking for. Creditors will want to make sure you are credit worthy.
   • Creditors will want to lend money to a person who has a good credit history.
   • They will want to know what your monthly or yearly income is, as they will want to make sure you can handle your monthly payments.
   • They will look into whether or not you have something as collateral, such as a house or car that can be used against the debt if you cannot manage payments.
   • They will also look into your character, such as past employment and any criminal records.
2. Know your credit status. You can get a free credit report online to look into your credit.
   • Keep track of all your accounts, and pay bills on time.
   • If you have any late payments on your credit report, check into them. If they have been paid, dispute them with the credit agency.
   • Make sure you aren't taking on too much debt. You can look at the amount of any revolving debts you have on a credit report.
3. Fill out any applications for credit, loans, mortgages, or rentals. Fill out all forms completely and honestly.
   • Be prepared to submit proof of income, including but not limited to, tax returns, sales receipts, bank statements etc.
   • Meet with your bank or lender in person if possible to fill out applications and make introductions.
   • Don't be alarmed if a lender wants more information than asked for an on application. They just want to make sure you are a good candidate for a loan or credit.

Providing a Tax Return

1. Make sure you qualify as self-employed. Only certain individuals are classified as self-employed for tax purposes.
   • You are considered self-employed if you are the sole proprietor of a business or an independent contractor.
   • You can also be part of a partnership that carries on a trade or business.
   • If you are otherwise in business for yourself, you are also considered self employed.
   • This can include things like babysitting from your home, income from cosmetic sales, taking in roomers or boarders, rental income, profit from swap meet sales, can collecting, or blood/plasma sales.
2. File a yearly tax return. You are required by the IRS to submit a federal tax return on all income you earned in a year.
   • The deadline is April 15th, but typically you can file an extension if you need longer to get together your required documents.
   • If you are self employed, you need to use Schedule C or Schedule C-EZ if you are filing a return.
   • You will also need to file Schedule SE (1040 form) Tax for Individuals to pay your Medicare and Social Security Tax.
3. Consider having a professional file your taxes. Filing taxes can be difficult for self-employed individuals, particularly in the first year of business.
   • Make copies of all receipts, statements, bills, invoices etc. related to your self-employed income.
   • Provide these to your tax professional.
   • Report any undocumented income as well.
4. Keep a copy of your tax return. Once it is filed, it will contain all information about the money you earned in a year and serves as a proof of income.
   • It is a good idea to keep at least 5 to 7 years of tax returns in a file.
   • Some lenders and creditors will want to see multiple years of proof of income.
   • These can help you document if your business or self-employed income is growing, which will be more attractive to potential creditors.

Providing Copies of Bank Records

1. Save your monthly bank statements. These usually come in the mail or electronically once a month.
   • These will document any deposits you made and any expenses related to self-employment.
   • Try to keep these on file for several months at a time.
   • Make sure you keep your statements for different accounts separate.
   • For example, if you have an account that you mainly make personal purchases out of and a business account, you will want to keep these statements separate.
2. Visit a branch of your bank to get copies of statements. If you haven't gotten a statement or need copies of the past few months or years of statement, your banker can help you get these.
   • Most banks have these on file electronically for the history of your account.
   • Your bank can either print a statement for you or have one mailed to you.
   • If you are requesting multiple statements, it is often best to do this in person rather than have them mailed as they contain sensitive information about your bank account.
   • Make sure you bring your ID to the bank with you to verify you are the account holder.
   • If you have online banking, you can often access these and print them at home if you can't get to a branch.
3. Keep copies of all deposit slips. These can help you show income because they are a record of money going into an account.
   • Deposit slips will have the date of the deposit, the amount, and your name or business on them.
   • These can document exactly how much income you have going into an account.
   • When a deposit is made, these are often stamped or printed on for verification by the bank. Sometimes, the bank will provide you with a paper receipt for your deposit. You should keep all of these records.
4. Supply bank statements and deposit slips/receipts to your creditors. These provide a long-term record of your finances.
   • These will help your creditors or lenders know exactly how much income you are bringing in along with your expenses.
   • If you can show a high income to expense ratio, you are more likely to get approved for credit or financing.
   • If you can, provide at least 3 months of statements and deposit receipts.

Providing Other Documentation of Income

1. Consider using a payroll program. If you pay yourself a percentage of profits or regular salary out of your self-employed income or business, you can actually process payroll receipts to yourself.
   • These can document how often you are paid and how much. If you are part of a partnership you may consider paying yourself a regular salary rather than drawing on a business account as needed.
   • You can write official checks out of a business account into a personal account to show income.
   • You aren't necessarily required to deduct payroll taxes in this event, though this income is considered taxable by the IRS.
2. Make invoices and receipts for all sales and services you provide. Have your customers sign these as proof of services rendered and as proof of payment for those services.
   • Keeping these can also help you keep track of your income for tax purposes.
   • It is also a good idea in case there is a customer dispute later.
   • These can help you show a creditor or lender that you regularly bring in income from your business or self-employment.
3. Keep a spreadsheet of all expenses and payments in and out of your business or job. This will keep you organized and
   • This can help you keep track of a number of factors in your business in the same place.
   • By using a spreadsheet you can track customer accounts, all your business or employment expenses and profits.
   • If you have paper documentation for each of these items, make sure you note in your spreadsheet where it stored so you can access it for a lender or creditor.

Tips

• Always document every expense, sale, and profit no matter how small.
• Keep records dating back several months if not years.
• Make sure you file a federal tax return. This is often the best documentation of income you can provide.

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