Are you self-employed and need to provide proof of income to someone else?
Whether you are seeking to buy a home or car, or rent an apartment, you may be required to prove that you have an income stream that justifies the extension of credit or a large loan.
An expected 42 million Americans will be self-employed by the year 2020 – a record number in the United States. This means that there will be more people than ever before who are in a situation that is similar to yours.
Read on to learn the answer to the question, ‘What is proof of income?’
Bank Statements
Your bank statements are a great way to show a business or bank that you are worthy of receiving credit.
You can establish your income by printing out copies of your bank statements and providing them to someone else for review. Your bank statements reflect your cash flow each month.
Whether you are paid via check, credit card, or through a third-party website like PayPal, bank statements will show how money enters and exits your account.
Pay Stubs
When you are a freelance worker, you may not have regular streams of income or methods of payment.
You may receive payment through a combination of a check, money order, or a credit card.
If you work for one client regularly, you may have paychecks from a pay stub creator that reflects your rate of pay and your income for a certain period.
One of the best ways to establish your income from a specific source is to provide a pay stub for the very last paycheck of the year. The pay stub may include information such as your year-to-date pay.
This information will give someone a clear idea of how much income you generated from that source.
Income Taxes
Your income tax return from the previous year is a great way to establish the income that you’ve earned in the recent past.
An income tax statement is like a road map of what you’ve earned through your work. It’s also looked upon favorably because it’s a document that you’ve sworn to the accuracy of before it was filed with the IRS. To ensure accuracy, you can prepare your income taxes with a big assist through TurboTax Live, and since it is completely online you can do this without ever needing to leave your home in Oakland, Minneapolis, Fort Worth, or anywhere else in the United States.
Accurate Balance Sheets
Keeping accurate records of your income sources and losses, if any, is an effective way to show a creditor that you take you are serious about your finances.
Use a program like Microsoft Excel to breakdown your monthly income and expenses in an easy to understand way. You can do this by including the date, the source of the payment (or cost), and the amount.
By substantiating this information with a paper trail such as a pay stub or receipt, you will make this a lot easier for someone else to review.
Wrapping Up: What is Proof of Income?
When first asking, ‘What is proof of income?’, you may be concerned that you won’t have what you need to establish your true income level.
However, when you know the documents you need to prove your income and how to maintain these records, you will find that this process is much easier than you may have first thought.
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