What Documents Do You Use as Proof of Income?

On Freelance Switch, Thursday Bram posts about an issue freelancers commonly face: how do you prove your income?

This is especially useful if you’re applying for loan financing, for instance, buying a home, a car, or even leasing an apartment. If you work for a company, you can always secure a certificate of employment. Sometimes, if you work for a top corporation in your city, creditors will be quick in their approval. If you lack documents, though, you might have to go through hoops before you can convince them of your financial capability.

Most of the time, you can present your tax documents as proof of income. But for some of us who work freelance in the informal sector (meaning you don’t pay taxes), this could be a problem. In some places, you might be asked for business documents. In my city, for instance, banks and financing companies ask for business registration and a mayor’s permit. And that’s for a “self employed” classification!

Most freelance writers and bloggers bear the responsibility of taking care of their taxes and social security payments. No one else takes care of these for you automatically, unless you can afford to hire your own accountant. We don’t even have group health insurance, so those who buy insurance have to pay a non-discounted rate.

As for me, I usually use bank statements to back up my claims for income. Whether my revenue comes through PayPal or bank transfers, these all go through several bank accounts, which–I’m quite thankful–are all at least two to three years old. I also have some contracts with freelance clients. Sometimes it’s difficult to explain that clients can come from all over the world, and that contracts are transmitted by scanned or faxed documents. But so far I haven’t experienced any big hitches.

Have you experienced a situation wherein you need to prove financial capability, but you’re having difficulties giving documents because you work freelance? What documents have you used? Or what alternatives do you have?

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Comments

  1. Bank statements are the best, but i also dont hold all my money in one bank, but rather divided it equally on different accounts, just in case someone wants to do some fraud…

  2. How about when you have recently shifted to another place and don’t have any solid proof of residence.

  3. In Sweden everyone got to pay taxes irrespective of which niche you are working in. With VAT I got to pay just over 60 percent tax on my income.

  4. How do you avoid taxes by being a freelancer? Anyway, usually I just give them the details of my accountant who can verify I’m making a certain amount of money. Works for me.

    Sean

  5. The only problem that I’ve run into with taxes is that if you do whatever you can to minimize the amount of your income you actually pay taxes on, a lender can assume that the reduced amount you’ve paid actually reflects your income and that you don’t make as much money as you say you do. It can be more than a bit frustrating.

  6. Bill Grieger says:

    I saw this site http://www.yourworkfromhomeplace.com and this proof of life video was a killer! I think if you’re looking to make a point and have proof, a video is the route to take. People talk all day long but can’t back it up. Nothing says PROOF more so than a video, unless of course you can see it in real life. It’s on the home page near the bottom on the right hand side. Check it out and I’m sure you’ll be impressed.

    Bill Grieger

  7. J Angelo Racoma says:

    @Sean, I think @Thursday has got it spot on. Most of us would try to minimze tax expenses, and therefore try to downplay our actual income. But this can work against us, because banks would view that reduced income as how much you earn.

    @Stefan, 60%? That’s highway robbery! But I guess with states with a high standard of living like Sweden, that’s justifiable.

  8. thank you article

  9. This is especially useful if you’re applying for loan financing, for instance, buying a home, a car, or even leasing an apartment… thanks for article

  10. …Most freelance writers and bloggers bear the responsibility of taking care of their taxes and social security payments… thanks for article.

  11. What Documents Do You Use as Proof of Income? Because of your knowledge, thank you.

  12. The amount of your earnings you in point of fact reimbursement taxes on, a lender can guess with the aim of the cut-rate amount you’ve paid in point of fact reflects your earnings and with the aim of you don’t cause as much money as you say you complete.

  13. Very good post! I am a self employed freelancer as well… and when i needed proof of income and employment, i went to http://www.incomedocuments.com and was able to print out backdated paystubs, w2’s and 1099 forms for any tax year!

  14. are beautiful thanks for sharing web design

  15. the bloggers bear the responsibility of taking care of their taxes and social security payments.

  16. the bloggers bear the responsibility of taking care of their taxes and social security payments.

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  1. [...] a couple of articles relating to blogging and finance. Here on Performancing, I thought about how bloggers prove their income or revenue streams when banks and other entities require these. On the Blog Herald, I tried to compute for the monthly [...]

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