Paystubs are often issued to employees by their employers, but sole proprietors, solo-LLC owners, and freelancers won’t receive this document from their clients. However, modern technology has made it possible for anyone to create and print their own paychecks.
Most freelancers will need to apply for a loan, mortgage, or apartment at some point. Most lenders will ask for copies of your personal documents to complete your paperwork, but if you don’t have any way to prove your income, your application will be rejected or put on hold.
Paystubs are generally accepted by most lending institutions, but that doesn’t mean you’re out of the woods yet. If you just started your freelancing journey, you’ll have to bring a copy of your bank statements, put up collateral, or get a co-signer. If possible, bring a copy of your tax return.
Tax season can be intimidating for freelancers, especially during their first few years. Anything that makes self-employment taxes less overwhelming is welcomed. Self-generated paystubs definitely help simplify the tax process, especially if you need to pay taxes quarterly.
Independent contractors can use paystubs to list their pay and all the deductions withheld by clients. During tax time, you can easily transfer that amount directly to your 1099-NEC forms. What’s more, paystubs allow you to categorize business expenses, like meals or travel.
When you start giving yourself a paycheck, you’ll have a clear picture of what you make weekly, bi-weekly, or monthly. With that knowledge, freelancers will know exactly how much they charge for their products or services in comparison to their personal and business expenses.
It’s often difficult for freelancers to price what their time is worth, but a paystub makes that decision easier. If you notice your clients aren’t paying you enough for your time, you can suggest a raise, reduce your hours worked, or search for clients who will pay you your new rate.
Freelancers want to spend less time with their finances and more energy towards completing work and finding clients. It’s easy for our records to become disorganized if we aren’t staying on top of them, but paystubs are the perfect way to keep track of your work hours and hourly rates.
There are two ways you can keep your financial records tidy via the paystub method: pay yourself per project, on the same day, or on a schedule. Since most employees are paid every other week, you could simplify tax filing further by treating yourself as a standard worker.
Freelancers could show proof of income by offering a business proposal, or they could learn to set prices by tracking their payment schedule with a spreadsheet, but these methods take a lot of work. Making paystubs and paychecks is easier, cheaper, and less time-consuming.
Most paystub platforms are free-to-use or come free of charge with an accounting program. At the same time, you don’t need to use expensive software to track your income if you don’t want to. What’s more, paystubs are accessible to all freelancers, no matter what they make.
If you’re a new freelancer who finds it difficult to monitor their expenses and determine their tax burden, using paystubs is a great first step. As you grow your business, you may not use paychecks as your prime record-keeping method, but it’ll always be fun to pay yourself.