If you’re a freelancer, you’ll certainly encounter situations where you’ll be required to prove your income. For instance, when you want a loan from your bank or need to rent an apartment, the service provider will require proof of income.
Unfortunately, unlike employed individuals who can easily get pay stubs from their employers’, self-employed persons may have a harder time providing proof of income documents. This is especially true if you don’t have proper records of your income or if you don’t earn from the same source.
The good news is that showing proof of income as a self-employed person isn’t impossible. In this article, we take a detailed look at the pay stubs that can act as proof of income when you’re a freelancer.
What Is a Pay Stub and Why Is It Important?
First, it’s important that we understand what a pay stub is and its purpose.
A pay stub is a document showing a person’s earnings for a given period of time. Other details found in a pay stub include:
- The individual’s personal details
- Gross earnings before deductions
- Amount deducted as expenses
- Estimated taxes deducted
- Net pay after deductions
So, why would an individual need a pay stub?
For starters, a pay stub is used as proof of income when you need to apply for a mortgage, a loan, health insurance and credit card. Pay stubs are also useful for filling one’s taxes.
Is There a Self-Employed Pay Stub?
For employed persons, pay stubs are provided by their employers.
Unfortunately, as a self-employed person, you can’t receive a self-generated pay stub from your client. This is because you are your own boss and aren’t subjected to similar laws and regulations as those that govern the provision of pay stubs to employees.
However, you can generate your own pay stub or use a pay stub generator to come up with one.
Here’s how it works.
As a freelancer, you can create your own pay stub to show proof of income. However, it’s essential you have accurate records of your income and expenses if you want to generate accurate pay stubs. For your pay stub to be considered valid, it must have the following information:
Gross earnings before deductions – This is the total amount of money you’ve received for services rendered
Deductions – These include deductible expenses such as insurance premiums, taxes Medicare, business expenses, and social security
Net pay – This is the amount of money left after subtracting the above mentioned deductions from your gross pay
It’s also important to include the period covered by the pay stub e.g. monthly, weekly or a given projected duration
Alternatively, you can use an online pay stub generator for the same purpose. Most online pay stub generators only require you to enter your gross earnings and deductions and they will calculate your taxes and net earnings from the information you’ve provided.
Notably, you should know that it’s your responsibility to enter accurate data on the pay stub generator for it to generate an accurate pay stub.
How Else Can Self-Employed Persons Show Proof of Income
In addition to providing a pay stub, there are other documents that you can use to prove your income if you’re self-employed as explained below:
Recent tax returns – Tax return forms such as the 1040 and 1099 forms can show proof of your income. The 1099 form is filled by clients who pay more than $600 for your services. These clients are expected to fill the form and send it to you and the IRS for tax purposes
Bank statements – Deposits of your business income made in a business bank account will show up in statements provided by the bank. This is especially important if you want to show proof of income that doesn’t appear in the 1099 form
Profit and loss statements – Keeping accurate profit and loss statements can help track your income and expenses and show the amount of income earned in a given period
Receipts, invoices and contracts – Other documents that can prove your income are invoices, receipts and contracts.
Conclusion
In closing, showing proof of income as a self-employed person doesn’t have to be difficult. With the right documents, you now can generate your own pay stub or use a pay stub generator for the same purpose.
