calculating lost income for self employed

Calculating Lost Income for Self-Employed Individuals After a Car Accident

Lost income is a significant part of many accident settlements. Considering that many Americans live paycheck to paycheck, an unexpected loss of income can be financially devastating. It’s more complicated if you are self-employed. If you don’t earn a set salary or hourly wage, how can you prove that you lost out on income as a result of your accident?

Don’t wait too long to talk to an attorney about your personal injury claim. We can help you fight for the compensation you’re owed. Call Hedge Copeland at 251-432-8844 to set up a consultation now.

Look for General Patterns in Your Earnings

If you’ve been self-employed for years, you should have a good idea of your earning patterns and fluctuations. Of course, you’ll need documentation to back that up, but it gives you a good starting point.

For example, if you are self-employed as a tax accountant, you may do the bulk of your work between February and April. If you’re injured during that time and unable to work, you may have lost out on the majority of your income for the year. With proof of previous years’ earnings, you can fairly calculate your lost income.

Consult Tax Documents and Invoices

Tax documents are valuable evidence if you have been self-employed long enough to show a trend in your earnings. However, this may not be helpful if your earnings vary widely from year to year.

If your income is $50,000 one year, less than $20,000 the next year, and $70,000 the next, it’s nearly impossible to guess what you would have earned had you not been injured. However, if your last three tax returns show income of $50,000, $55,000, and $70,000, you can see the general upward trend in your income.

If your self-employment work involves clients, consider using your invoices as evidence. If you were in the middle of work when you were injured, you can use canceled or voided contracts as proof of the actual money you lost. If you have an average of $4,000 in invoices each month but only $1,500 in the month that you were injured, you have a case for lost income.

Turn to Clients You Work With Regularly

This option depends largely on the strength of your client relationships and the level of familiarity you have with clients. If you work with the same clients on an ongoing basis, they may be willing to testify on your behalf. Information on how much work you usually do for them and how much work they would have given you if you had not been injured can prove your lost income. If they had to redirect work to other contractors because of your injury, that may work in your favor.

Calculate Business Expenses You Incurred While Unable to Work

Don’t underestimate your lost business expenses while injured. Even if you’re unable to work, certain expenses keep rolling in. If you rent a coworking space or private office space, you likely still have to make payments on the unused space while unable to work.

If you pay for web hosting, design programs, or editing software, those costs may have cut into your already slim profit margins while you were injured. If you had to outsource your work to other contractors in order to maintain your client relationships, those expenses may have put you in the negative for the month. Those are all expenses that you may be able to have reimbursed in your settlement.

Your Attorney Can Help You Prove Your Lost Income

Even if you’re overwhelmed by the idea of proving your self-employment income—especially against an insurance company invested in paying you as little as possible—your attorney can provide guidance. Gather all of the financial and income documents you have, provide copies to your attorney, and move forward from there.

Explore Your Legal Options with Hedge Copeland

The sooner you contact a personal injury attorney after your car accident, the sooner they can begin building a claim for you. Our team is standing by, ready to talk to you about your claim and help you fight for fair compensation. Give us a call at 251-432-8844 or send us a message online to schedule a meeting.