PROOF OF INCOME
If you're a driver, and you work freelance because you have multiple clients for different days of the week, then you're considered an independent contractor.
It also means you're self employed, so Congrats!
Drivers can be paid per hour or a fixed rate and it all hinges on what your agreement between you and your clients are.
However, if you are an independent contractor earning more than $600 at a given time, then you should file your income taxes.
You are then required to show proof of income. Here are some of the ways to show proof of income for drivers.
HOW CAN DRIVERS SHOW PROOF OF INCOME?
If you're a freelance driver or independent contractor, then generating pay stubs may be the fastest way to show proof of income. Pay stubs can help you report your income and remittances and keep track of your income in real-time!
Proof of Income Letter
If you're working for a taxi company or agency, you can easily ask for a proof of income letter from your Management or HR. Telling them the purpose of why you need a proof of income letter is important.
If your customers pay you online, your transaction receipts or screenshots of them can serve as great proof of income documents! Making sure you keep them or at least save them in your phone and email ensures that you won't stay behind when tracking the payments made to you.
If you're working for a manager, they ought to give you your W-2's as well. It is an employer's responsibility. You can also track your W-2 wages from a pay stub. You may also file Form 1040 if you are an independent contractor. In any case, tracking your income and your tax returns are surefire ways to make sure you can prove your income.
How Freelance Drivers can File Income Taxes
1. Register your business name
First thing, it's important to register your business with the state and federal government.
You will need to fill out a business license application. This can be done online through the state website, or you can visit your local tax office.
You'll also need to register your company with the IRS and the state. You might have already filed as a self-employed person, but if you haven't, file as an LLC and set up a bank account to deposit profits and pay expenses.
2. Keep track of mileage on your vehicle for tax purposes
If you are using your car for work purposes then you may be able to deduct the mileage on your vehicle from taxes. You'll need to keep track of all of your miles in case you get audited or need to prove how much you drove during a certain period of time (e.g., if you are claiming a deduction).
3. Set up business banking accounts separate from personal accounts
It's a great idea to compartmentalize. Never mix business and pleasure or business and family. Having your own accounts when you're picking up clients makes it easier to track and it makes bookkeeping all the more faster to perform
4. Set up a separate business checking account for your company
Banking is very important when you're an independent contractor because it allows you to keep track of your money and expenses, as well as protect yourself from fraud.
It's also an easy way to stay organized, especially if you have multiple clients. You can simply deposit checks in your account and easily transfer money between different accounts.
5. Save receipts for business-related purchases and travel expenses
When you have a separate business account, it's easy to save all of your receipts so that you can deduct any business-related purchases or travel expenses later on. This can include mileage on your vehicle, gas, tolls, meals, tolls and other things that are related to work.
6. Set up a deduction plan ahead of time for those tax-deductible expenses earlier in the year (if possible)
If you can set up a deduction plan ahead of time for those tax-deductible expenses then that will help you out later on because it will be deducted from your taxes in the beginning of the year which means more cash flow!
7. Save some money for medicare and social security
If you get paid in cash, it's tempting to use all of that money to spend right now. But if you want to reap all the benefits the state and federal government has to offer, you must set aside money for your own social and medical remittances.
8. Set up a retirement account if you can.
As an independent contractor, you have the option of setting up a retirement account. This is a great way to save for retirement and help keep your business running smoothly by contributing to your own retirement account.
9. Save money for your car's repairs
If you need to spend on maintenance, you may also need a separate fund altogether for repairs and maintenance. It's a good idea to compartmentalize. You have to be resourceful and make sure that your spending and your savings are all in check.
10. Stay on top of taxes and report them at the end of each year
You may be required to file Form 1040 if you make consistent, linear income. If you have miscellaneous expenses, you may be tasked to file Form 1099's. It's a good idea to stay on top of your taxes.
Get Your Proof of Income Now
Do you need proof of income? Urgent or not, we can help you with that! Try our online paystub generator.