How to provide paycheck proof when you’re self-employed
Many self-employed people struggle with having documentation of income.
It’s common to receive compensation in the form of paychecks and cash when you’re self-employed. However, this isn’t sufficient proof that you were paid for your labor. While a paycheck demonstrates that you’ve been paid, it doesn’t tell you who you’ve earned money from or for what.
A pay stub can be used to show your income by including all of the pertinent information associated with receiving payment. A pay stub contains all of the relevant information for paycheck confirmation, from gross pay to net pay.
Continue reading to learn more about how to use pay stubs to establish your income.
What is a Pay Stub?
A pay stub is one of the most effective ways to demonstrate your earnings because it effectively lists everything you’ve earned. When people are paid, they usually obtain pay stubs from their employers. Self-employed people can still use them, but they will have to make them themselves.
A pay stub supplied by an independent contractor will have the same amount of information as one provided by an employer. You can begin filling out pay stubs that can be used as legal proof of income if you have the necessary information.
When people want to apply for things like loans, they frequently utilize pay stubs. Lenders will want to know how much money you make and how much is taken from it.
Here are some of the most typical loans:
Auto finance
Many individuals are familiar with the concept of auto finance. Financing a car, like a mortgage, entails borrowing money to acquire a vehicle. The lender will use the automobile as collateral instead of a house.
Line of credit
The majority of people obtain a credit line in the form of a credit card. A line of credit permits you to borrow money indefinitely as long as you repay it. Because a line of credit is revolving debt, you don’t need to continually apply for fresh loans.
W-2 or 1099?
If you’re still unsure, read over your paperwork again. Which tax form do you obtain for your work at the end of the year?
A W-2 is a tax form issued by a firm to its employees. It includes information concerning tax withholding, holiday pay, and health insurance as well as annual salary.
Independent employees should use a 1099-MISC form. It only shows the total amount of money you received during the year, excluding any withheld amounts.
Is a 1099 a valid pay stub for independent employees? No. You can, however, make your own pay stub using the information from your 1099.
How Do You Make a Pay Stub?
A simple spreadsheet tool or a pay stub generator are all that is required to create a pay stub. Once you have access to one of these, you may begin filling out the required information to complete the pay stub.
You’ll need to go over a few calculations before you can start making it. Your gross salary, deductions, and net pay are the most important factors to consider. If any of these are incorrect, the pay stub will not be considered valid.
Gross Salary
The whole amount of money you’ve earned in a pay period is referred to as gross pay. It is easy to compute for those who work full-time jobs because their income is consistent. As a self-employed person, however, your gross salary will vary based on the type of work you conduct.
Self-employed individuals who are paid differently for each job will have a different gross pay on each stub. For example, you could make $5,000 one month and $3,500 the next after completing a project. It’s ideal to keep track of everything by creating a pay stub each time you’re paid.
It’s important to remember that gross compensation does not include any deductions. If taxes aren’t deducted automatically from your paycheck, the amount you’ve received should be the gross salary.
The pay stub usually has two columns with gross pay information: current gross pay and year-to-date gross pay.
Deductions
Deductions are anything that is taken from your paycheck. Because self-employed persons rarely have deductions in their paychecks, you’ll have to figure things out. Social Security, state, and municipal taxes are the most popular deductions.
Net Pay
The total amount of money after deductions is known as net pay. For instance, if you earned $5,000 in a pay period and had 14% deducted from it, your net pay would be $4,300. If your paychecks are automatically deducted, the total amount you receive should equal your net compensation.
On the check stub, include both the pay period net pay and the year-to-date net pay.
Generate Pay stubs Online
You can always use a pay stub generator if you don’t think you’ll be able to produce one with spreadsheet software. You can use a generator to choose a paycheck stub template you like and begin filling in your details.Because you don’t have to worry about formatting, this takes a lot less time than producing one with a spreadsheet tool. The one drawback is that you won’t have a lot of customization choices, but the templates will all appear professional.
Anyone who is self-employed should start keeping track of their pay stubs so they can show their earnings. With a 1099 pay stub, you can begin taking out loans and keep accurate records of your earnings. Paycheck proofing with a pay stub can be done in minutes, whether you use a generator or an application like Google Spreadsheets.
All you have to do now is start calculating your compensation and deductions so you can fill out the pay stub correctly. You can then print it and make copies for your records.