We all know it’s rude to ask people how much they make. But it’s standard practice in certain circumstances.
When that happens, you need to back up your claim with proof of income, and writing it down on a piece of paper isn’t enough. Your income matters to lenders, landlords, and others with whom you do financial business. Proving income shows you can be counted on to make whatever future payments you are promising to make.
You have several options for documentation you can use to show your income, most of which will work in any situation where it’s required.
Common Forms of Proof
If you have to provide proof of employment, during the rental application process for example, you have several options. Most of these are documents you should have easy access to if you are currently employed.
You might be asked for a proof of income letter, which you can write yourself or have written by an accountant, social worker, or your employer. The letter would include basic income information to show how much you make, the number of hours you work, and your hourly rate.
This letter works well for those where your income varies from week to week, such as part-time work where you might not work the same number of hours every week or when earnings come from commission. Note that this letter is different from a general employment letter, which is how to prove employment only.
You will still need official documentation to back up this letter. The most common forms of proof would be
- Last year’s tax return
- Bank statements – personal or business
- Wages and tax statement – W-2 or 1099
If you didn’t keep copies of your tax information, you can get a transcript or copy of your tax return and W2 from the IRS for a fee or ask your employer to produce a new copy of your W-2.
Proof for Other Types of Income
If you’re self-employed or your income comes from something other than a regular job, you might wonder how to prove your income without a pay stub. A different set of papers that show your income can supplement the ones listed above.
- Wages and tax statement – 1099-MISC
- Social Security benefits letter
- Workers’ compensation letter
- Pension statements
- Annuity statement
- Interests and dividends statement
Some of these relate to unearned income. While you didn’t work in exchange for the money, it is still considered income for tax and financial purposes.
When to Show Your Proof of Income
Proof of income is often required in situations where someone might also run a credit check on you. It’s a standard part of the apartment application approval process, for example.
Expect to provide income proof anytime you are promising to make ongoing payments to a person or entity. These include renting an apartment, enrolling in life insurance, and getting a loan such as a mortgage or to buy a car.
Final Word on Proof of Income
Formal documentation of some sort is almost always required when you enter into a financial arrangement, whether that be a rental agreement or a loan. Keeping good records and copies of paperwork makes showing proof of income much easier when you are asked for it.
Keep reading our blog for more helpful tips.