Can I Recover Lost Income if I’m Self-Employed?

Being self-employed offers flexibility and independence, but it also means that when unforeseen events like accidents occur, the financial impact can be significant. If you’ve been injured in an accident caused by another party and are unable to work, you may wonder if you can recover the income you’ve lost during your recovery period.

**Understanding Lost Income for the Self-Employed**

In Arizona, the law allows individuals, including those who are self-employed, to seek compensation for lost income resulting from injuries sustained due to someone else’s negligence. This compensation aims to cover the earnings you would have received had the accident not occurred.

**Proving Lost Income**

For self-employed individuals, demonstrating lost income can be more complex than for traditional employees. Unlike salaried workers who can provide pay stubs, self-employed individuals must rely on other forms of documentation to substantiate their claims. Essential documents include:

• **Tax Returns**: Your federal and state tax returns from previous years can establish your average income.
• **Bank Statements**: These show deposits from clients and can help verify your earnings.
• **Invoices and Contracts**: Documentation of work agreements and completed projects can demonstrate expected income.
• **Profit and Loss Statements**: These provide a detailed view of your business’s financial performance.
• **Client Correspondence**: Emails or letters indicating canceled projects or lost opportunities due to your inability to work.

It’s crucial to differentiate between gross revenue and net income. Compensation is typically based on net income—the amount remaining after business expenses—not gross revenue. This distinction ensures that the compensation reflects your actual financial loss.

**Arizona’s At-Fault System**

Arizona operates under an “at-fault” insurance system, meaning the party responsible for the accident is liable for the damages incurred. To recover lost income, you must prove that the other party was at fault and that your injuries directly resulted in your inability to work. This process involves gathering evidence such as accident reports, medical records, and the aforementioned financial documents.

**Challenges and Considerations**

Self-employed individuals may face challenges in proving lost income, especially if their earnings fluctuate or if they lack comprehensive financial records. In such cases, working with a personal injury attorney can be invaluable. An attorney can help compile the necessary documentation, work with financial experts to estimate lost income accurately, and negotiate with insurance companies on your behalf.

**Case Example**

Consider a self-employed graphic designer in Phoenix who was injured in a car accident caused by another driver running a red light. The injuries required surgery and a three-month recovery period, during which the designer was unable to work. By providing tax returns, client invoices, and bank statements, the designer was able to demonstrate an average monthly income. With the assistance of a personal injury attorney, the designer successfully recovered compensation for the lost income during the recovery period.

**Conclusion**

Recovering lost income as a self-employed individual in Arizona is possible, but it requires thorough documentation and a clear demonstration of how the accident impacted your ability to earn. Given the complexities involved, consulting with an experienced personal injury attorney can help ensure you receive the compensation you deserve.

If you’ve been injured and are facing lost income, contact Hirsch Talcott at 602-903-6000 for a free consultation. Our team is dedicated to helping self-employed individuals navigate the legal process and recover the compensation they need to move forward.