As a freelancer, have you ever tried to request a loan from a bank only to be turned away because you could not provide proof of income? Being your own boss certainly comes with many advantages as you only answer to yourself, you could pick your schedule, and you are no one's employee. However, you may wonder how to create pay stubs if self-employed, given that no employer would give you one.
If your employment status is self-employed and you are new to self-employed pay stubs, making one could become confusing and tedious. Though, as you go along your journey to becoming a successful freelancer, a paycheck stub for self-employed would go a long way.
This article would not only help you know the ins-and-outs of paycheck stubs for self-employed but also teach you how to create them. So read on and take advantage!
What Are Self-Employment Pay Stubs?
For a freelancer or the self-employed, payment generally comes either in a paycheck or in cash, and you usually do not receive a pay stub. If you want to request a bank loan or any loan, pay stubs are one of the important documents to have. Presenting your paycheck would not help either and most likely guarantee that you would be turned away.
Most of the time, banks would request a breakdown of your income for them to base your loan on. This is where self-employment pay stubs come in very useful.
One of the best ways to provide proof of your income is through a pay stub, especially for self-employed people. If you are doing a freelance job, and you want to get a car loan, self-employment pay stubs are the way to go for providing your income statement.
Pay stubs will help banks and other lenders determine if you are earning enough and capable of paying them. They document all details of someone's income from gross pay to net pay, including all information on taxes, deductions, benefits, and additions. They act as paycheck proof, summarizing the totality of how much you take home.
Generally, employers give paycheck stubs to their employees as income statements, and usually, your clients do not have pay stubs to give. However, it is still possible for you to create a self-employment stub yourself.
Making your own template would give you more freedom when it comes to customization. You would be able to put more detail and information into your payslip.
Additionally, when it comes to filing your taxes, entering the correct information would become more manageable.
Advantages of Check Stubs for Self-Employed
You could consider a self-employed earnings statement, along with pay stub generators, as a tool for your accounting needs. Freelancers and self-employed people such as lawyers, doctors, and other professionals would sometimes hire staff such as secretaries and receptionists, so creating pay stubs becomes a crucial part of the business.
Proof of Income
As stated earlier, when taking out a loan for a car or house from a bank, one of the best ways to provide proof of income is through a pay stub. Self-employed check stubs would provide lenders details of your cash flow because they would want to know if you have cash left at the end of the month. Although it may seem personal, pay stubs would verify that you are financially capable of paying loans or rents.
Show Profit and Loss Statements
As with any business, it is best to keep track of your income and business expenses. Pay stubs would make your job easier, faster, and more accurate when accounting for your cash flow. You would also see your progress as you grow. However, as you are the boss, you should be honest with the information you insert in the statement.
Keep Track of Invoices and Contracts
Pay stubs for self-employed people also act as a record of invoices and contracts between clients and customers. They keep you updated with your taxes and contributions, and sources of your income. Online check stub generators could store all records in cloud storage, giving you access to data anytime you need them.
Paystub Generator for Self-Employed Boosts Productivity
Using a pay stub generator would significantly increase the speed of accounting your money, making it easier to perform and less tedious. Online generators, such as Real Check Stubs, saves you time using pay stub templates with customizable information. You simply input the necessary data, and it automatically calculates your taxes and net income.
Filing Your Tax
At times, to acquire a loan, banks require you to provide them with your latest tax returns. The details of your taxable income would tell lenders if you have enough money to get a loan. If you lower your taxable income for some instance, banks will not approve the loan, as it would reflect that you do not have enough money. Some freelancers preserve their income by reducing the taxable amount. However, this practice would lead to lower loanable amounts too.
Understanding how to create pay stubs would make filing taxes faster and easier and save you fees from hiring an accountant.
Using a self-employed pay stub generator creates a professional atmosphere in your work, making you more reliable and trustworthy. Pay stub services to save you time, money, and effort while enjoying the benefits of having instant access to all files. Pay stub generators also create official documents for when you get paid for your services.
How To Make Pay Stubs if Self-Employed?
Creating pay stubs is not that difficult of a process. However, you would need to pay close attention to all details, as they are considered legal documents.
Every pay period, employees receive pay stubs from their employers. As for freelancers and self-employed, they would need to make it themselves. If you are paid on a project basis or have a contract that lasts for months, make a pay stub every time you get paid.
You could use a spreadsheet to make your pay stub template after every project or contract, inputting all calculations before beginning. Alternatively, you could use self-employed pay stub generators, such as RealCheckStubs, to generate your pay stubs for you.
Online generators provide a more convenient experience, as they provide formatted templates, provide you with what information is needed, and automatically calculates results.
The following are the information you would typically find in any template format provided by online pay stub generators.
Your gross income or pay is how much a client or customer owes you after a project or a contract before taking out any deduction. This is your base income and the basis for all subsequent computations. You could easily calculate your gross income by dividing your annual salary by the number of times you received payment. So if you are paid on a monthly basis, divide your annual salary by twelve. Keep in mind that for this part, you would need to ignore money taken out for taxes.
Taxes and Deductions
Taxes and deductions are anything taken out of your gross income, such as contributions, benefits, local and state taxes, and Social Security Taxes. You could also refer to the IRS Employer's Tax Guide for a more in-depth and updated list and descriptions of all applicable taxes you would need to pay as a freelancer or self-employed.
Just like regular employees, the earning statement for self-employed shows that your company pays you regularly, which means all necessary taxes are withheld from each paycheck. Withholding amounts keep you aware of all taxes owed at year’s end. It is better to withhold from each paycheck than to make up estimated quarterly payments or lump sums during tax filing.
You can derive your net income from subtracting all applicable taxes, deductions, contributions, and other necessary charges to your gross income. Fortunately, self-employed pay stubs generators could do this function automatically and accurately. You just need to make sure to input all information correctly.
Net income is the amount you find at the last entry in your self-employed pay stub.
If you are the only employee in your company, you may still want to create a payroll system to issue self-employed check stubs to yourself. Meanwhile, if you have employees under your payroll system, then you could add yourself to the system. Doing this establishes your pay rate and withholding information.
You may also opt for payroll services where bank affiliates, bookkeepers, and accountants issue your check stubs.
Freelancers and self-employed range from architects, lawyers, and doctors. They enjoy the many advantages of being their own boss. However, even self-employed have to take responsibilities such as providing proof of income for loans and filing for taxes. This is where a self-employed pay stub generator could greatly help provide official documents for payments towards their services.