Use your tax forms to prove your income.
Working for yourself can be very liberating, but it can also be a difficult transition. One of the most difficult challenges freelancers face is proving their income to a potential lender, rental agency or mortgage company. While ordinary workers can simply present a pay stub to prove how much they make, freelancers need to be a bit more innovative.
Tax Return
A tax return is often the best proof of income for a freelance worker. The IRS requires that freelance workers carefully document what they make and report the entire amount to the IRS. That means the tax return is likely to have the most complete information about your earnings for the past several years. The tax return is also an official document, and that can be important to lenders and mortgage brokers.
Bank Statement
If you work as a freelancer, you should have a separate bank account for the business. Setting up a separate bank account for your freelancing allows you to keep your income separate, and paying your business-related bills out of that account makes it easier to track your expenses come tax time.
You can also use your bank statement to provide proof of income to loan officers, real estate agents, apartment managers and mortgage companies who need it. A bank statement is good as proof of income, especially if you receive regular direct deposits or checks from clients. You can circle the deposits on each bank statement to show how much money you make in a typical month, and use several consecutive bank statements to show an income trend.
Invoices
If you send invoices to your customers as part of your freelance work, you can present copies of those invoices to lenders, rental agencies and others who need to know how much you make. Gather all of the invoices you have presented over the course of the year and use that to document how much money you made. If you use an accounting program to track your business income and expenses you can use that to create a list of the invoices you have sent.
Contracts
Copies of the contracts you have with regular customers or clients can work as proof of income. These documents show that you have steady income coming in month after month, and that can reassure lenders who may be hesitant about lending money to self-employed individuals with unpredictable income.
1099-MISC Forms
If you work as a freelancer or consultant, you probably receive several 1099-MISC forms at the beginning of each year. You can use these forms to document your income when you apply for a loan, rent an apartment or ask for a new line of credit. Just be sure to gather all of the 1099-MISC forms you receive and add the figures to derive your total annual income.
