If you’re self-employed, proving your income can seem like an impossible task. Traditional employees have their pay stubs and W2 forms to easily verify their earnings, but what about those treading the path of independent work or owning a business?
By understanding how to generate proof of income effectively, you maintain optimal financial transparency and increase your chances of securing partnerships, loans, or leases with ease.
And when your own business runs on WooCommerce, tools like the WooCommerce Analytics dashboard can be very beneficial in regard to income tax calculations.
In this guide, we explore various means at your disposal for generating reliable proof of self-employment income bolstered by insights provided by WooCommerce Analytics.
What is Proof of Income?
Proof of income is a document or set of documents that validate how much money you earn.
As the name suggests, it “proves” your income. This might be in the form of pay stubs for regular employees or tax returns and profit and loss statements for independent contractors.
These documents are often requested by lenders, landlords, or other entities that need to verify your financial status before entering into an agreement with you.
When self-employed, creating reliable proof of income may require distinct documentation and calculation efforts.
How to Prove Income When You Run a Business
When you’re self-employed, showing proof of income can be a challenge. Fortunately, there are multiple ways to prove your income when you run an independent business:
1. Annual Tax Return (Form 1040)
Your annual tax return, typically submitted using Form 1040, is a substantial document that chronicles your earnings over a year.
As a self-employed, this form integrates your revenue streams, deductions, and credits, providing comprehensive data on your finances.
2. Self-Employed Pay Stubs
Self-employed pay stubs may not be as common, but they are an effective method to verify income. You can generate pay stubs that can act as your proof of income for banks and lenders.
Several online services can assist in creating these for your many income streams.
3. 1099 Forms
If your self-employment consists of providing services to various clients, you will likely receive 1099 forms. These forms reflect the payment you obtained from each client throughout the year.
An amalgamation of these forms can serve as a robust proof of your annual income to lenders.
4. Bank Statements
Bank statements can be a reassuring proof of income for the self-employed or business owners. They meticulously record your transactions, detailing both earned and spent funds.
Particularly if they reflect consistent deposits, bank statements can provide evidence of your income level.
5. Profit and Loss Statements
Profit and loss statements clearly outline your revenue against expenses, showcasing net profit or loss. When well-maintained and accurate, these kinds of statements can offer a key authentication of your income, further substantiating your claim about business performance.
How to Use WooCommerce Analytics to Prove Your Income
Some proof of income options, such as self-employed pay stubs and profit and loss statements, require specific financial data, but how do you get that using WooCommerce?
1. Navigate to Analytics > Revenue
On the WordPress dashboard, navigate to Analytics > Revenue. In this section, you’ll see information that you need to prove your income, such as gross sales, total sales, and net sales.
2. Subtract Total Refunds
Your total proof of income should not include refunds, so only what you’ve kept in your pocket. In WooCommerce Analytics, refunds are shown as a negative number, include discounts from coupons, and don’t include refunds from shipping charges or taxes.
Be sure to subtract any refunds from your gross sales, but don’t do so from total sales, as it already subtracts refunds.
3. Use the Performance Section
The Performance indicators section appears at the top of your dashboard below the Date Picker by default. This section includes everything that’s on the revenue page but also serves as a shortcut to dive deeper into the data behind your stats.
This deep dive may be necessary for profit and loss statements or if you’re unsure what each statistic means or represents.
As you navigate the world of self-employment, being proactive and keeping clear financial records is essential. Understand that components like tax returns and profit/loss statements are more than just mere administrative tasks; they’re keys to unlocking opportunities that hinge on your proven income.
If your business relies on a WooCommerce website, using tools like WooCommerce Analytics streamlines proving your income.