How do courts calculate loss of earnings for self-employed plaintiffs in car accident and other personal injury cases? This can be actually a fairly complex issue. If you work for an employer, it’s pretty simple. If you’re out for two months your employer fills out a form that says what you would have earned, but if you’re self-employed and you have your own business then it gets a little tricky and the reason it gets tricky is because your earnings probably vary.
You may be a person who does better in the winter than in the summer, you may be a person who was having a good year or a bad year. So, it’s a subjective issue, but they are calculated based upon what your average earnings would have been during the period of time you were unable to work, and there’s no black and white, concrete answer. But typically, if you have your books in order for the prior few years, and you can show what you earned in general, we will be able to recover what you would have earned during that period of time.
Independent Contractors and Using 1099 Forms to Show Income
For plaintiffs who are self-employed but do work for another entity as an independent contractor, it can be easier to calculate lost earnings. As an FAQ sheet from the Internal Revenue Service (IRS) explains, independent contractors typically receive a Form 1099-MISC from the employer. The Form 1099-MISC provides information about payments the independent contractor has received in compensation for work.
Even if the independent contractor did not earn the same amount of money each month—in other words, if the income was somewhat seasonal—the Form 1099-MISC can provide information about the annual income. Since a self-employed independent contractor must report these earnings as income to the IRS, tax returns can also be useful for calculating earnings for a self-employed plaintiff. However, using tax returns can be a complicated issue for certain plaintiffs. Sometimes, for a variety of reasons, plaintiffs do not want information about their federal and state income taxes to become part of the court record. Under California law, a plaintiff cannot be required to produce copies of federal or state income tax returns in cases that do not specifically concern matters of tax law.
Calculating Income for Small Business Owners and Other Self-Employed Plaintiffs
Similar complications with regard to income tax returns can arise when attempting to calculate the loss of earnings for a self-employed plaintiff. Sometimes an unincorporated business will have a Form 1099-MISC. However, there are many self-employed plaintiffs who are small business owners and thus do not have an obvious source of information for weekly or monthly income outside of tax returns. What can a self-employed plaintiff who is a small business owner do to show an accurate representation of his or her lost wages?
If you run a small business, you should be keeping receipts for everything you have bought and sold. Such receipts, combined with information contained within profit and loss statements, can help to show what you would have earned but for the accident that has prevented you from working.
You also may be able to take into account lost time that would have result in greater earnings. What do we mean? For instance, imagine that you got hurt in an accident and were unable to work for a month. In addition to continuing to earn the profit amounts to which you have become accustomed, maybe you were also planning to engage in a more direct marketing campaign for your business. Thus, as a result of your injuries you may have lost marketing time that would have increased your earnings. On a related note, perhaps your business relies extensively upon the goodwill you create with patrons of your business. In being unable to work for a month, you may have lost some of that goodwill, and thus your profits might have been lower than average after you returned to work.
An experienced California personal injury lawyer can discuss options for valuing these additional losses as part of your lost income.
Contact an Oakland Personal Injury Attorney if You’re Concerned About Car Accident Lost Wages if You’re Self-Employed
Calculating lost wages for a self-employed plaintiff can be extremely complicated, and as such it is important to have an experienced personal injury lawyer in Northern California on your side. Contact GJEL Accident Attorneys today.