Detailed answer — proving lost earnings when you’re self‑employed

This is a practical, plain‑language guide to the types of proof insurers, defense lawyers, and courts typically expect when a self‑employed person claims lost wages or lost business income after an accident in North Dakota. This is educational information only and not legal advice. Consult a licensed North Dakota attorney about your specific situation.

Key concepts

• Lost wages for a self‑employed person are usually treated as lost earnings or lost profits — not just an hourly wage.
• You must show both that the accident caused the loss and a reasonable, documented calculation of the amount lost. Courts and insurers reject speculative claims.
• Reliable contemporaneous records (invoices, bank deposits, tax returns) weigh far more than later recollection.

Step‑by‑step approach to proving lost income

1. Preserve and gather primary financial records. The most persuasive evidence includes: tax returns (Schedule C or business returns) for several prior years; bank account statements showing deposits and withdrawals; invoices, receipts, and cancelled checks; accounting ledgers or payroll reports if you use payroll; 1099s; contracts with clients; and marketplace statements (e.g., Etsy, Uber, Amazon) showing gross payments.
2. Create contemporaneous business documentation going forward. If the accident just happened, keep a daily log of missed jobs, appointments cancelled due to injury, lost leads, and time you could not work. Save emails, texts, calendars, booking system entries, and client cancellations. The more detailed and contemporaneous, the stronger your proof.
3. Use tax and bookkeeping records to establish your baseline income. Compare your average income from the same months in prior years to the months after the accident to show lost revenue. Tax returns are often the starting point because they are official records submitted to the IRS.
4. Support gross receipts with expense records to calculate lost profits. For self‑employed claimants, the important figure is usually net income (gross receipts minus ordinary and necessary business expenses). Keep receipts for supplies, subcontractor payments, rent, utilities, and other deductible expenses.
5. Document medical restrictions that prevented work. Obtain medical records and a written note or report from the treating provider that explains how the injury limited your ability to perform specific work tasks or prevented you from working for specific dates.
6. Obtain client statements or affidavits. Ask clients or customers to confirm in writing that they cancelled work, postponed projects, or switched providers due to your inability to perform. Third‑party corroboration strengthens your case.
7. Hire an accountant or financial expert when numbers are complex. If your business uses cash accounting, has irregular income, or you claim future earnings loss, a CPA or forensic accountant can prepare a profit‑and‑loss analysis and an expert report that explains lost earnings using accepted accounting methods.
8. Document mitigation efforts. Keep records of job searches, alternative work, subcontracting attempts, or efforts to reduce losses. Showing you tried to limit damages helps your credibility and may be legally required.

Common calculations and how they’re supported

There are two common ways to calculate lost income for a self‑employed person:

• Short‑term (past) lost income: Compare actual receipts during the recovery period to your average receipts for comparable prior periods. Use tax returns, bank deposits, invoices, and bookkeeping to prove both figures.
• Future (prospective) lost income: Use historical earnings patterns, contracts, expected future bookings, and an expert report to estimate ongoing losses. Courts require reasonable certainty and evidence supporting projections (past performance, signed contracts, industry practice).

Practical examples of admissible proof

• IRS Schedule C and state business tax filings showing year‑over‑year income declines.
• Bank deposits and payment processor statements matching invoices that were not completed because of the injury.
• Signed client contracts showing work scheduled during the injury period.
• Emails from clients cancelling a job because you were injured.
• Accounting P&L statements, prepared contemporaneously or reviewed by a CPA.
• Medical records linking physical limitations and dates of incapacity to client cancellations and missed work.

Be ready for common defenses

Insurance companies and defense lawyers often argue that lost income is speculative or that the claimant failed to mitigate damages. Anticipate and counter these defenses by:

• Using clear before‑and‑after comparisons and contemporaneous documentation.
• Showing client refusals or cancelled jobs that directly tie to your inability to work.
• Proving you took reasonable steps to mitigate losses (subcontracting, rescheduling, partial work).

What to do immediately after the accident (practical checklist)

Take these actions right away to strengthen any lost income claim.

• Get medical care and obtain written restrictions or work‑capacity notes from providers.
• Notify your insurance company and, if applicable, the at‑fault party’s insurer. Report the loss in writing.
• Preserve all business records and make digital backups of invoices, calendars, emails, and bank statements.
• Begin a contemporaneous diary of missed jobs and lost time, including dates, clients, and expected income.
• Ask clients for written confirmation of cancellations or lost revenue.
• Consult a North Dakota attorney experienced in personal injury or insurance claims if the lost income is significant or if liability is disputed.

How an attorney or accountant can help

An attorney can advise on liability, handle communications with insurers, and evaluate whether your lost income claim meets legal standards. An accountant or vocational expert can prepare calculations of past and future lost earnings, translate business records into admissible exhibits, and provide expert testimony if your case goes to court.

Helpful Hints

• Use tax returns as the anchor: courts and insurers often treat them as authoritative evidence of income.
• Keep separate business and personal bank accounts and use consistent bookkeeping methods.
• Prefer contemporaneous records over reconstructed estimates made long after the accident.
• When possible, get written confirmations from clients about cancelled work and expected fees.
• Document non‑monetary losses (lost customers, lost goodwill) but know courts require concrete proof for those claims.
• Be honest and consistent: discrepancies between statements, tax returns, and later testimony reduce credibility.
• Act quickly to preserve evidence; digital records can be lost, changed, or deleted.