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It is an easy task for full-time, contracted employees to deliver a proof of employment. All they need to do is ask the HR department at their firm for a copy.
Self-employed might not be able to show a proof without any help. Verifying employment is crucial when applying for a personal loan. In this blog, we will be covering how to show proof of employment if you’re self-employed individual.
Who is eligible to be a Self-Employed Individual?
Self-employed, commonly known as Independent Contractor report self-employment income. If you’re self-employed, you will work for yourself rather than for an employee.
As stated by the IRS, a self-employed individual is someone who:
- Partakers in trade
- Is part of a partnership in a trade
- Is in business for themselves
Self-employed individuals may work for:
- Writer
- Editor
- Designer
- Salespeople
- Construction Workers
What is a Proof of Employment?
Proof of employment is a form of document that hires companies to request to confirm an individual’s work history.
Below mentioned are the common reasons why a third party might want to verify your employment which include:
Loan Applications: If you are trying to apply for a loan, the lender will want to see whether or not you will be able to pay back their money which is based on your monthly income.
They might also want you to provide a proof of your employment. Once this is understood, the lenders shall establish how the repayment can be scheduled in terms of loans.
Applying to Rent: Many property owners rent out their houses and want to make sure that the new tenants will be able to afford the rent or not.
For example, are you going to work somewhere else or on the property itself? The proof of employment helps the landlord get a better understanding of your employment and if you have a stable income in order to cover the rent.
Searching for Another Job: If you’re looking for another job, salary negotiations will inevitably happen, and the interviewer will ask about your current salary, which they shall take into consideration. This will give the employer a brief overview of your past employment status.
Credit Card Applications: Finacial Institutions depend upon various factors when they consider requests for credit cards, which include the applicant’s current employment and salary. Proof of your employment shows credit companies that you will be able to meet your debt goals and their payments in a timely order.
How to Show Proof of Self-Employment?
HR departments at large companies have to deal with proof of employment and also have a system in place to issue these documents. However, if you’re a self-employed individual, you might need to generate these documents yourself in order to show a proof of your employment.
Annual Tax Returns: Form 1099-NEC is a tax document which is used to report the income earned by independent contractors. Firms are required to file a copy of Form 1099-NEC with the IRS and to send a copy to the independent contractor. This is because the IRS must know that how much tax revenue they can expect from a self-employed individuals. It is important to note that the independent contractor who has earned more than $600 from a business shall receive a Form 1099-NEC.
Form 1099-NEC is used for showing verification of your income. It provides physical proof of self-employed earnings, the amount earned, and where it came from. 31st January is the deadline to submit independent contractors with a copy of their Form 1099-NEC. It is also the deadline for providing the employees with a W-2 form.
Pay Stubs: A pay stub is a written document that showcases how much a person is earning during a specific pay period. There are different ways via which a self-employed worker can receive and create pay stub. One choice is to contact the HR department at the firm where you have provided services.
For a self-employed individual, this is the basic information listed on a pay stub:
- The name of the firm that provides the service for
- Independent Contractor’s Job Title
- Number of hours worked during a pay period
- The total wages paid before the self-employed worker’s deductions made
- State, Federal, and Local taxes withheld from an individual contractor’s gross earnings
Pay stubs are important because they can provide proof of income and employment for self-employed individuals.
Bank Statements: Bank Statements, commonly known as account statements- are documents that are typically sent by a financial institution to their account holder each month.
This account statement is a history of all the transactions that the account holder makes during a particular period of time. The statement contains bank account information like account numbers detailed list of the holder’s total income and expenses.
For lender and financial institutions, a bank statement can be the proof of the employment and can afford to meet their repayment dues on time.
Employment Verification Letter: An employment verification letter is the kind of document which is written by a current employer who confirms the employment status of the current employee. Potential employers and other various government agencies can request an employment verification letter.
Conclusion
So, now you know that if you’re a self-employed individual and need a loan for a car, showing a letter of self-employment as proof of income this should not be a problem for you and in case you need to create paystub, we have our very own free paystub generator for you to generate a pay stub easily.
