Most people will need to provide proof of income at some point in their lives, and there are lots of contexts in which it will be entirely essential if you want to move forward with a specific formal process.
If you are completely new to this concept, here is a quick introduction to what proof of income involves and the ways in which you can give concrete evidence of your earnings that will be accepted by third parties.
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As the name suggests, proof of income is usually a document that gives an irrefutable indication of how much money you make. Check out this guide on the basics of proof of income and the documents that may be required.
In terms of when you will be required to produce this, it could be necessary when applying for a residential lease agreement, a mortgage, a bank loan, a credit card or any other type of contract in which you will be beholden to another individual or organization from a financial perspective.
The primary reason that proof of income is sought is that it will give a good indication of whether or not you will be able to keep up with the repayments or the rent that will be due each month. Otherwise anyone could make false claims about their earnings and effectively commit fraud.
The eligible documents
There are regional differences in terms of which documents will be accepted as proof of income, as well as variances depending on the kind of product or service you are applying for.
However, there are some pieces of paperwork that are almost universally legitimate for this purpose. Paychecks are at the top of the pile, so as long as you have a job and you receive a formal record of your earnings from your employer, this will be enough to back up your income claims.
Of course not everyone receives a paycheck, and in the case that you are self-employed, a contractor, a business owner or receive your income from some other source, then you will probably need to present tax documents to demonstrate how much you earn.
Bank statements are also a good example of a commonly accepted proof of income, as you can show your incomings and outgoings over the course of time.
As well as understanding what documents you will need to act as proof of income, it is also worth noting that there are differences in requirements and eligibility according to your employment status.
For example, if you are a permanent employee of a business, then you might only need a single month’s paycheck to support your claimed income amount. Conversely if you are self-employed or a contractor, then you could need up to two years of accounts and tax information, in addition to bank statements, as evidence.
In short, be sure to check carefully what type of documents are needed as proof of income so that you are prepared in advance, and have the time to get the paperwork together, rather than being surprised by subsequent requests from lenders.