Proving income for your taxes can be a tricky thing, especially if you are a self-employed earner or have rental property income. For taxation purposes, it is very important to have verifiable proof of income.
There are many ways and reasons why you need to prove your income. Here are some tips to follow if you are looking for an easy and verifiable way to prove your income this year.
Why do you Need Proof of Income?
There are many reasons why you may need to prove your income, and different ways that you can go about it. Here are some common reasons why income verification is so important, and ways you can provide it.
1. Applying for Loans and Opening Bank Accounts
One of the main reasons you will need to have proof of income is for banking purposes. From personal loans to mortgages, banks will require proof of your income, and they will require a record of income that can be proven in many ways.
The normal way to prove income is with employment paystubs. Sometimes, however, using paystubs can be difficult, especially in the case of self-employment income or casual work. You may do small jobs that are paid via cash, and you may not be provided with employment pay stubs as you would with a normal regular job. You can prove this income by providing months worth of bank statements and trying to explain where the income came from, or you can simply use an easy and affordable online tool that will generate these paystubs for you.
Banking will always require proof of income, so it is important to think about how you will prove your income before you make your way to the bank to apply for that next loan.
2. Applying for Government Benefits
If you have a low family income, you may be entitled to certain government benefits and programs, but these often require some type of income verification. If you are struggling with making ends meet and are looking to apply for charitable or government benefits, then you will need to provide proof of income to support your need for those benefits.
There are many reasons that you may be applying for these programs, and it can all be very personal and confusing, however, if you and your family are struggling, then these programs may be the lifeline you need to get you from point A to point B. Before applying for these programs, it is important to make sure your paperwork is to apply.
3. Doing Income Taxes
Income taxes are probably the most important and prolific reasons you will need to have proof of income, and also proof of expenses. Income taxes are required every year, and to ensure that you are getting the best return on your taxes. If you have business expenses, rental management expenses, and any number of write-offs for your taxes, then ensuring you have accurate and detailed proof of this is important.
Along with providing proof of income for taxes, it is incredibly important to have the appropriate proof of expenses as well when you are filing your taxes, make sure that you keep all your record neat and clean, keep business and personal expenses separate, and try to maintain all your invoices, income, and expenses in an orderly and chronological fashion. This will help you in the long to prove all income and expenses for the year.
What Proof of Income Can You Use?
There are many types of income verifications in place in regards to proving your finances.
– Banks Statements
– Prior years taxation paperwork
* Notice of Assessment
* Self Employment Declarations
– Letter of Employment
– Employment Verification
– Accounts Receivable Records
Depending on the nature of your application, and what organization needs you to prove income, they will have different guidelines detailing what they see as usable and acceptable proof of income. It is important to know what kind of paperwork your institution will require before submitting your applications and documentation, so record-keeping throughout the year is key. Don’t throw out invoices, use a company bank account to separate your business and personal income and expenses. If you plan and have all your ducks in a row, then you will not have to scramble when the time comes for your application.
With appropriate research and record-keeping, you are sure to have an easy time verifying your income for 2021, no matter the reason it is required. Being detailed and organized with your finances will make any venture easier for you when the time comes.