A Guide to the Self-Employed Pay Stub: Proof of Income and Why It’s Important
From getting a bank loan to finding an apartment, almost every choice that involves money also requires proof of income.
For most people that’s easy to provide, they bring in a W-2 or a pay stub from their employer. But what if you are among the millions of people that are self employed? What options do you have for the “self employed pay stub”?
1. W-2 vs 1099
The difference between the two of these will determine your needs and how you would proceed.
An employer provides a W-2 which is the most common form referred to when doing taxes. It includes all number of details; income, withholdings, holiday pay, and health insurance information.
Whereas a 1099 only has the income itself recorded. There are no other details. You can not use the 1099 as a paystub. But you can use the information on the 1099 to generate a paystub.
2. Payroll Service
While it comes at a cost there is the option of running through a payroll service such as Paychex or ADP. These companies price their services based on the number of checks they write. As well as the number of employees they service, depending on the situation.
A payroll service has several benefits. They secure your business against tax penalties. Biggest of those being improper withholdings. They also provide 1099 forms when needed if you ever hire independent workers.
But most of the most important of all, they allow you to cut yourself your own check and with that a pay stub.
3. Create Your Own Pay Stub
If a payroll service is not within your means, you can use a paystub maker. With these, you are effectively providing the information as the “employer”.
You can create a collection of “self employed check stubs“. Those check stubs would allow you to document pay over time and provide proof of income.
4. Options Beyond
Bank statements can work but are generally the last choice when considering options. Statements tend to be a little more personal with the information they provide.
The benefit that a bank statement has is its detailed history. They can provide a picture of your cash flow over a period of time and the amount that remains at the end of each month.
With the nature of self employment and freelancing this is especially helpful. Some loan providers or renters may be hesitant because they know that work can temporary.
Proof of Income Is Easy Even When Self Employed
First and foremost to succeed self employed, strong record keeping is essential. Proof of income is nothing different. The pay stub issue can easily be addressed having so many resources available.
In this day and age with so many people working for themselves or working as freelancers the environment is changing and so is what is being accepted.
How we generate our financial records change with the market and it is shown with the options available. Utilize what has been shown and you will have no problem obtaining that bank loan or finding that apartment.