Can you claim lost wages for self employment?December 28, 2021 8:51 am Leave your thoughts
What Are Self-Employed Lost Wages?
The terms “lost wages,” “lost income,” “lost compensation,” and “lost benefits” are all used to refer to the number of earnings and profits you would have made if you hadn’t been harmed. For example, recent profits, impending contracts, lost company possibilities, and lost goodwill are included in these earnings. Keep in mind that lost wages should not be confused with lost earning capability, which is a different sort of damage that refers to the loss of future earnings.
When you’re self-employed, you won’t be able to obtain compensation for lost income due to an automobile accident unless you have clear proof of the wages you’ve lost. But, if you’re self-employed, how do you establish that you’ve lost money?
You must show proof of each source of income and show what your overall income would have been based on previous earnings, current and upcoming work, and previous tax filings. The following are some examples of lost income for self-employed people who have been injured in car accidents:
- Earnings from a contract that is paid weekly or monthly have been lost.
- Business opportunity squandered
- During your recuperation, you may have lost goodwill with existing clients and customers for whom you were unable to provide.
How to Prove Lost Wages and Income
It may be more challenging to prove missed wages and income if you’re self-employed than for employees. You won’t collect any compensation if you don’t have documentation of lost wages. As a result, it’s critical to present supporting documentation and evidence to the insurance company or the court. Supporting a salary loss claim frequently requires estimating when you’re self-employed. Here are some examples of documentation you can use to show your injuries and calculate your lost wages as a result of a car accident:
1. Evidence and Documents:
You’ll need to provide documentation and evidence to back up your claim for lost wages and income.
2. Proof of lost income and opportunity:
The objective is to establish how much you would have earned between the injury and complete recovery. If relevant, you may be requested to send your 1099 form(s), previous year’s tax return, correspondence, company invoices, or receipts.
3. Medical documents:
You must supply documentation demonstrating your medical condition. Your doctor may be able to supply you with medical records that detail your injuries. These records do not prove lost wages, but they show that your doctor advised you to take time from work due to your physical condition.
4. Invoices from the last few months:
You can use the most recent invoices to show how much you generally make from each client if you issue bills to clients. For example, copies of recently paid invoices might be used to calculate your lost wages after an automobile accident.
5. Tax returns from the past:
Tax documents such as 1099 forms and even completed prior tax returns can show you how much money you make regularly. For example, if you had a six-month recovery period after the crash, you might divide your usual yearly earnings in half to estimate how much money you lost.
6. Statements from customers:
If you have solid ties with your clients, you may be able to request a formal statement from them outlining your working relationship with them as well as the number of hours of paid work you missed following your accident.
After you’ve acquired all of your supporting evidence, you’ll need to figure out how much money you’ve lost.
What if an Employee is Paid “Under the Table”
Many workers, whether self-employed or on payroll, derive some or all of their income “under the table”, meaning they do not declare the income to the IRS or pay taxes on it. Common examples include a certain portion of tips for tipped workers like restaurant servers, delivery drivers, tour guides, and casino dealers. While the government may require employees to declare as income a certain percentage of the total bill on the assumption that the tip matches it, the declared amount is usually much lower than the actual amount.
Another way of hiding incomes is when self-employed people or small business owners take improper expenses that have the impact of reducing their net income for tax purposes.
Of course, it is illegal not to declare, or to reduce, income for tax purposes, but it is common. Few small businesses or self-employed people ever get audited or caught by the IRS. However, they realize a problem when it comes time to using that income to support a lost wages claim. If the income was not declared for tax purposes then injured victims will be reluctant to bring this income forward for purposes of their injury claim because this will be admitting past tax evasion. Even if they do try to use the undeclared income for a lost wages claim, an insurance company or mediator will not give the higher number any credibility because it was not previously declared.
How to Calculate Self-Employed Lost Wages
When you’re self-employed, calculating missed wages due to automobile accident injuries might be difficult.
You can evaluate how much you lost during your recuperation using a combination of your tax returns, recent bills, forthcoming or lost contracts, and estimates of the worth of missed business opportunities and lost goodwill with clients. Remember that any part of the shared fault you bear for the accident must be factored into the equation.
Mistakes can be made during this procedure. And making any mistake can cost you a lot of money at a time when you’re determined to get your lifestyle back on track. Hiring an attorney experienced in auto accident personal injuries is an important first step in reclaiming your life.
Contact our team at Cohen and Winters to learn more about how we might help you.
This post was written by Cohen and Winters