A Step-by-Step Guide on How to Show Proof of Income If Self-Employed
According to the United States Bureau of Labor, there were almost 10 million self-employed workers in 2016, and that number is only expected to grow in the coming years.
If you’re among this population, you know that while this lifestyle is extremely rewarding, it can also be quite stressful. You have to be at the top of your game in terms of organization, budgeting, and self-discipline at all times.
Because of this, it’s crucial that you have knowledge such as how to show proof of income if self-employed. If you know how to show proof of income, everything from purchasing health insurance to getting a loan will be easier.
To learn everything you need to know about showing proof of income as a self-employed individual, just keep reading.
Keep Records of Profits and Expenses
As a freelancer or other self-employed person, it’s vital that you keep a detailed record of all of your profits and expenses. This will not only help you keep track of your personal profitability but will give you a means of showing freelancer proof of income at the same time.
Every time you get a payment from a customer, write it down. When you pay your electric bill (if you work from home), make a note of the cost. This will also be a huge help when it comes time to pay your taxes.
Be Your Own Employee
On a day-to-day basis, it’s easier to deposit all of your profits straight into your bank account. However, when it comes to taxes and proof of income, it’s beneficial to make yourself an employee.
You’ll still be self-employed, but you’ll fill out a W-2 for yourself and give yourself pay stubs each week or month. In doing so, when you need proof of income, you can approach it the same way you would if you were employed by someone else.
If you’re unsure how to make pay stubs so you can rent your dream apartment, don’t worry. It’s not a difficult process. In fact, there are many pay stub generators that will do all of the work for you.
If you are self-employed and providing services to a business worth at least $600, you will receive a 1099 NEC form.
Use Your Tax Returns
As a freelancer or self-employed person, you won’t receive money back when you file your taxes, but you’ll still receive a tax return. Keep copies of all of your state and federal tax returns together in an easily accessible place.
While you don’t have to keep a lifetime’s worth of tax documents, the IRS recommends keeping a minimum of 7 years’ records.
Now, as a self-employed individual, you might be tempted to claim less income to reduce the amount of taxes you have to pay. This is a common practice, but be careful. Lowering your taxable income could make you an unsuitable candidate when it comes time to take out a loan for a car or house.
Make Your Life Easier by Learning How to Show Proof of Income if Self-Employed
Unfortunately, most major moves in life aren’t made easy for the person making them. Want to buy a car? You need proof of income. Need to rent an apartment? Proof of income. Looking to purchase a home? Well, let’s just say you’re in for a stressful few months.
That’s why it’s so important to know how to show proof of income if self-employed. With this knowledge, you’ll find that you run into far fewer roadblocks when making major life decisions and purchases.
Interested in learning more about navigating life as a self-employed individual? Take a look at our blog!