Car accident victims who are self-employed can prove their lost wages by using prior tax returns, 1099s, invoices, bank statements, contracts, and even statements from current clients. These documents can show the extent of the income that was lost due to the accident. Any income that is not reflected on these documents can be difficult to recover.
How do self-employed workers prove lost wages after a car accident?
People who are self-employed and get hurt in a car accident will face additional difficulties in proving the wages they lost from the accident. Depending on the circumstances, the following types of documents can be used as evidence of lost income from missed work:
- tax returns from previous years,
- 1099 tax forms from clients,
- current, outstanding, or past business invoices,
- bank statements,
- online transaction histories,
- deposited checks,
- client contracts that stipulate work and payment, and
- sworn statements or testimony from clients.
This documentation has to show what the victim would have made, were it not for his or her injuries. By establishing a trend of income from historical and recent profits, these documents can also be used to show what the victim would have expected to make in the future in the form of lost earning capacity.
In many cases, a mixture of these documents is used to prove a self-employed victim’s lost wages. Victims who keep meticulous records tend to have better success than those who do not. Victims with well-documented income from independent work can often present strong cases for lost income compensation without having to turn to client testimony, which can be awkward to ask for.
Having a strong record of income is important because, in a personal injury case, it is the victim’s responsibility to prove their lost wages claim. Generally, the victim has to prove these lost wages with a reasonable degree of certainty.1
The burden of proving economic losses is significantly harder for these small business owners or sole proprietors than it is for traditional workers. Traditional workers who earn an hourly or yearly salary and have a set work schedule generally have pay stubs that adequately show their lost income.
A car accident attorney can help freelancers and other self-employed workers prove their lost wages and recover their lost self-employment income, even if it takes expert testimony from an economist to explain what the worker would have made, were it not for the vehicle accident.
What if I am earning income under the table?
Income that is earned “under the table” is extremely difficult to recover in a personal injury claim after an auto accident. By its very nature, this income is hard to trace. This makes it very difficult to prove that the victim would have earned it with any degree of certainty.
Additionally, pursuing compensation for lost income that was earned but was not reported on the victim’s taxes can lead to other legal problems. By demanding this compensation, it is a tacit admission that the income was earned but was not reported to the Internal Revenue Service (IRS). This can lead to tax liability and may even amount to the crime of tax fraud.
What is considered lost income in a personal injury case?
Generally, lost income is not strictly limited to wages. However, for self-employed individuals, it often is because self-employed workers generally do not make other types of financial benefits. However, the self-employed can recover compensation for additional types of income that are associated with their business venture that other workers are ineligible to receive.
Car accident victims can recover compensation for the full amount of their lost wages. This generally includes:
- regular pay, whether hourly or in the form of a salary,
- overtime pay,
- bonuses,
- commissions,
- vacation time,
- personal days,
- sick leave, and
- other lost benefits, like free meals, vehicle reimbursement, or a per diem.
These benefits and other forms of income, however, are generally unavailable for self-employed individuals, independent contractors, or freelancers.
Self-employed people do have additional forms of income that other workers do not, though. These can include:
- lost business opportunities, and
- lost client goodwill, especially if the victim’s injuries will prevent him or her from completing projects under a deadline set out in a binding contract for work.
These additional forms of lost income can be seen as speculative, though. A personal injury attorney from a reputable law firm can help prove them with a reasonable degree of certainty.
How is this different from loss of earning capacity?
Lost wages and loss of earning capacity are 2 different types of damages in a personal injury lawsuit. Lost wages focuses on the income that was lost between the accident and the jury award or the settlement from the insurance company. Lost earning capacity focuses on the victim’s ability to make a living after the settlement or verdict.
Lost earning capacity requires medical records or a doctor’s note that shows that the victim’s working future will continue to suffer due to his or her car accident injuries. It is generally only available for severe injuries that will cause a long-term or permanent disability.
Will shared fault rules reduce compensation for lost wages?
Yes, the shared fault rules in the state of the accident can impact the victim’s recovery for his or her lost wages.
Shared fault rules are personal injury laws that govern what happens when the victim was partially to blame for the car crash and his or her injuries. Each state has one. They fall into 2 basic categories:
In states that use contributory negligence, if the victim contributed to the accident at all, he or she will be denied recovery. Very few states use contributory negligence rules.
The vast majority of states use comparative negligence. Under this rule, the victim’s compensation will be reduced by the percentage of fault they brought to the accident. In some states, like California,2 this means that victims can recover compensation for an accident for which they were primarily at fault. Other states bar recovery if the victim was more than half at fault.
The compensation that gets reduced by a shared fault rule includes compensation that covers the victim’s lost wages and income. Having a car accident lawyer show that the victim was not responsible for the accident can help to protect the victim’s compensation for his or her lost income.
