PROOF OF INCOME: HOW TO DO IT AND EXAMPLE - DUDAS - 2024

The proof of income is a verification that companies, financial institutions or other organizations carry out with their potential clients to ensure that they have the means to pay for the products or services that are going to be provided.

The most common time that proof of income will be requested is during the initial application or negotiation phase. This proof is essential to establish the origin of the funds or particular assets that are the object of the commercial relationship between a company and its client.

Source: piqsels.com

Proof of income may be required in order to ensure that the reason for the business relationship between the company and the client is consistent with what could reasonably be expected of that client, taking into account their circumstances.

If you are running your own business, checking income is not so simple, because you do not receive pay stubs. However, there are a number of ways that income can be verified using the financial and business records available.

How to make proof of income?

First, a proof of income letter must be made, which determines and confirms a person's income. This letter can be arranged by an accountant and should clearly state basic income information. In addition, the following documents must be attached:

Tax returns

If copies of tax returns have been withheld, copies of the requested years can be taken to present to the agency or lender. If you do not have copies of the tax returns in your own records, you can request them from the tax agency.

In general, a lender will want to see your tax return for the last two years. If you combine the total income during those years and average it, you will have the average net income. Dividing that number by 24 will show your average monthly income.

If income is irregular, this amount may be more useful to show that you have enough income to pay your monthly rent or mortgage.

Bank statements

The required statements can be drawn through the online bank account, but a branch may need to be visited. Depending on the agency requesting bank statements, statements may need to be collected over several months or several years.

If the origin of a deposit is not documented, such as when a customer pays in cash or has transferred from another account, be prepared to find documentation that shows that the deposit in question is income to be taken into account to prove income.

Contracts and invoices

Find out in advance what documents the lender or agency will need to prove income by making a checklist to check off while getting the documents. Hiring an accountant may be considered to ensure the files are in order.

It is also possible to communicate with clients to obtain from them receipts that are related to contracts or invoices paid.

Income statement

If you own a small business, you may have to create a profit and loss statement, which summarizes income, costs, and expenses for the time period requested by the lender or agency.

Income projection

If you are applying for a significant long-term loan, the lender may want to see your projected income for several years into the future.

Example

Income verification letter

Write heading and date

At the top of the document you should specify the contact details. Include name, address, contact number and email address. This will provide easier access for the answer. Then the date the letter was written must be entered.

If the company has a letterhead where the header is already present, it is not necessary to rewrite it.

Write the recipient

If the letter is to be addressed to a specific person, mention their name with their respective position in the company.

When you have a specific recipient, you start with "Dear" or "To", followed by the recipient's last name. For example, "Dear Mr. Gómez" or "For Lic. Quintero." If the person who will receive the letter is not known, the "To Whom It May Concern" standard is used.

Introduction of the message

In the opening sentences, you must first introduce yourself and clarify the reason for the proof of income letter. A polite greeting is the introductory part. Establish an impression on the reader. Therefore, an ethically professional treatment must be maintained.

For example, you can say: “My name is Johanna Rodríguez. I am writing this letter to verify my income in correspondence with my home loan application. In addition, this letter will serve as a document to support my merit for approval.

Saying it as direct as possible will help save time. The primary and secondary income should be mentioned.

You can mention the business or occupation you have. In addition, the time that you have been earning that amount of money and the time you expect to continue to maintain that income.

For example, “I am a sales manager for company Y. I have been working for this company for eight years. My monthly compensation is $ XXXXX. In addition, I also have a small company, the Z car wash. This entity has been operating for five years and earns around $ XXXXX a month ”.

Indicate attachments

There should be a note indicating the presence of attachments. This section basically presents the additional documents, notifying the recipient that there is supplementary documentation that they can use if necessary.

Closing

The closing is as important as your introduction. Final remarks also vary according to level of formality and function. Some have less professional purposes, such as "With pleasure," "With gratitude," or "Thank you very much."

There are also phrases for more professional situations, such as: "Sincerely yours," "Best regards," or "Sincerely."

Firm

Especially if the document is printed, stamping the signature should be the grand finale. In the space provided after closing is the part needed to sign the letter and nowhere else.

Include attachments

As already indicated that there are additional documents attached to the letter, this is the section where they can be specified. All supplementary documents must be named.

References

1. James Wilson (2017). Self-Employed? Here's How To Show Proof Of Income. The Pay Stubs. Taken from: thepaystubs.com.
2. Jennifer Mueller (2019). How to Prove Income. Taken from: wikihow.com.
3. Sum & Substance (2020). Proof of Income: How to Effectively Determine Your Clients' Financial Status. Taken from: sumsub.com.
4. Timothy Harris (2019). What is Proof of Income? Apartment Guide. Taken from: apartmentguide.com.
5. Examples (2020). 9+ Proof of Income Letter Examples. Taken from: examples.com.