There are many entities such as landlords and lenders that require proof of income before they can engage in any business with you. In addition, having proof of income is important when determining things such as amounts you can get as loans and your health insurance.
It is therefore important for you to understand every aspect of your income and how they affect different opportunities in your life.
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Proof of Income
Proof of income consists of a document(s) that can be used by another person or an entity to verify that you have an income and determine how you qualify for certain opportunities.
Documents establishing proof of income include all the information with regard to your basic income. It might also include things like the number of hours you work every week, how you are paid, and the duration of your employment.
There are many advantages to having proof of income, some of them discussed above. It also helps you when checking on your budget and financial health to make sure that you are not living beyond your means.
What Can You Use as Proof of Income?
Depending on the entity asking you for proof of income, some documents are preferred to others. The most common documents you can use as proof of income include;
Documents from your Employer
Getting proof of income documents from your employer is one of the most recommended ways of proving that you have an income. This is because these documents show the exact picture of your income and take into account any changes that might have taken place.
You can get pay stubs or a letter showing your income from your employer. Pay stubs show the frequency of your payment as well as the payment period. They also include every detail, including any deductions and allowances that you might have earned.
Even though some people make their own pay stubs, you should always avoid getting a fake pay stub at all costs since it might land you in trouble.
In addition to pay stubs, you can also get a letter from your employer to act as your proof of income. If you are lucky, you can use this letter as a recommendation letter depending on the relationship you have with your boss.
Tax Documents
There are entities that might require you to provide them with your tax documents since they know how difficult it is to cheat when it comes to these documents. However, if you want to use your tax documents as proof of income, you need to make sure that you keep copies after every tax season.
Even though you might use these documents as proof of income, you need to note that they are not very accurate at times because of the rate at which taxes are filed in most countries – it is usually once every year.
If you have had a raise in your salary after filing your tax returns, this raise will not be reflected for the entire year until the following year when you will be filling the tax returns again. It is, therefore, good to create a pay stub to support any changes in your income.
Unemployed/Unearned Income
Most of the documents used as proof of income in this category are usually issued by the government. Even though they are legal and reliable, you should not always depend on them because they lack consistency.
These are the documents that people receiving unemployment benefits from the government use as proof of income. However, it is advisable to use these documents if you only need to prove that you have had income within a short span of time, such as six months.
Other documents that can be used as proof of income include annuity statements, social security letters, court orders, pension distribution statements, and worker’s compensation letters.
Conclusion
Every document that serves a purpose in your life is important and needs to be handled with care. If your employer provides you with proof of income documents such as pay stubs, you need to make sure that you keep them safe at all times. These are documents that entities can use for you to get access to different services.
