One of the most serious losses you incur after a catastrophic personal injury is the loss of income due to missed time working. That income goes to pay mortgage or lease payments, utility bills, car payments, and the ordinary expenses of daily life. Proving how much those wages would be when you are employed by another company is usually a simple matter of providing pay stubs and calculating your salary or hourly rate times the amount of time you will miss at work.
However, calculating lost income when you are self-employed is far more complicated. It is important to get an accurate picture of the income you could expect to receive to get fair compensation for the time you have missed. There are several documents you can produce as evidence of the income you would have earned.
Even most small businesses keep accounts with balance sheets and profit and loss statements as part of their general accounting. These reports show the income generated by the business as well as the expenses involved in operations on a regular basis. From these reports, you can also show the profit the business made as well as how much you regularly received as the business owner.
While these statements are helpful in demonstrating the amount of income you would have received, they are generally not the best source. Because you generate these reports as part of your business, these can be altered or manipulated to distort the amount of income you receive. For this reason, they are not seen as completely reliable sources for proving your income.
The yearly tax returns you file with the federal or state government are considered reliable as proof of income. Because the law requires you to accurately report your income and you may face heavy fines for failing to report income, tax returns are generally trusted to fairly represent your income.
However, it may not always be a good idea to disclose your tax returns as part of proving lost income. The California Supreme Court has ruled that you may not be compelled to turn over your tax returns in these cases. The federal and state statutes requiring taxpayers to disclose their financial information are best served by taxpayers being free of anxiety that the information disclosed on the returns will be used against them in some other way.
For that reason, you may not want to disclose your tax returns as part of proving your income.
If you receive a 1099 for your work, you may use these to prove the income you make as a self-employed individual. The information on 1099s is reported to the government and is therefore considered reliable evidence. However, even if you receive a 1099 for some of your income, you may have other income not reported on a 1099 making the income represented incomplete.
If you have contracts for upcoming work that you will not be able to fulfill due to your injury, that can form a good basis for supporting your claim of lost income. The contract should show the amount that you expected to receive in exchange for the work provided, as well as the time period in which the work was expected to be completed. As with 1099s, however, these contracts may not show all the income you expected to receive before your injury.
In most cases, it will require multiple documents to accurately reflect all the income you missed out on due to your injury. By pulling together all of your financial information, it is possible to piece together an accurate picture of the income lost. Expert testimony from a financial witness can help establish future earnings potential that you will miss out on due to your injury as well. By pulling together all these sources of information, you can get the compensation you deserve for missed income even when self-employed.