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Overview under Pennsylvania law

If you are self-employed and suffer an injury in an accident caused by someone else, you can seek compensation for lost earnings as part of your damages in a personal injury claim. Pennsylvania law allows recovery for lost wages and loss of earning capacity as elements of compensatory damages. Act promptly: most personal injury claims in Pennsylvania must be started within the state’s statute of limitations. See 42 Pa.C.S. § 5524 for the general two-year limitation on personal injury actions: 42 Pa.C.S. § 5524.

What counts as recoverable lost earnings

• Past lost earnings: net income you actually lost from the date of injury until trial or settlement.
• Future lost earnings (loss of earning capacity): reduced ability to earn in the future because of lasting injuries.
• Business interruption losses: profits your business lost because you could not work or because clients canceled.
• Related expenses: extra costs you incurred to try to keep working (temporary help, hiring subcontractors).

How Pennsylvania courts typically evaluate self-employed lost earnings

Courts and insurers focus on proof of both the amount and causation—showing that the injury caused the reduction in earnings. For self-employed claimants, judges and adjusters favor contemporaneous, routine business records and reliable documentation tying losses to the injury.

Key types of proof to gather

Collect as many of the following as you can. The stronger and more consistent the documentation, the better your chance to recover the full amount you claim.

• Tax returns (federal): complete Form 1040s and Schedule C (or corporate/partnership returns) for the last 2–5 years. These establish baseline earnings and seasonal patterns. (See IRS forms for reference: Schedule C (Form 1040).)
• Profit & loss statements: year-to-date and historical P&L statements showing gross receipts and net profit.
• Bank and merchant account records: deposits, payments, and cleared checks that corroborate income and client payments.
• Invoices and contracts: signed contracts, proposals, unpaid invoices, and letters from clients who canceled work because you were injured.
• Client communications: emails, texts, or letters documenting cancellations, rescheduled jobs, or lost opportunities.
• Accounting ledgers and calendars: appointment books, work logs, timesheets, and job files showing what you did before and after the injury.
• 1099s or W-2s: if you receive 1099s from clients, these are strong evidence of prior income.
• Receipts for substitute labor: bills for hiring others or paying overtime to keep client promises.
• Photographs and project records: proof of incomplete projects or damaged work related to the accident or your inability to work.
• Medical records: to link your inability to work to the injury, including doctors’ notes on work restrictions and anticipated recovery time.
• Expert reports: forensic accountants, vocational experts, or economists who can calculate past and future lost earnings using accepted methods.

How to calculate lost earnings when self-employed

1. Establish a pre-injury baseline: average net income for a representative period (commonly 2–3 years). Use tax returns and P&L statements.
2. Compute actual post-injury earnings: use bank deposits, invoices, and tax records for the period after the accident.
3. Adjust for non-injury factors: seasonality, normal business growth/decline, and macroeconomic changes.
4. Subtract post-injury earnings from expected earnings (baseline). The difference is your estimated lost earnings for the period.
5. For future losses, multiply reduced annual earning capacity by expected remaining work years, discounting to present value and accounting for inflation and lost opportunity. Experts usually prepare this portion.

Example (hypothetical): If your average net income before injury was $60,000/year and you earned $30,000 in the 12 months after injury, past lost earnings would be $30,000 for that year. Future losses require expert analysis.

Authentication and admissibility tips

Pennsylvania courts admit business records when properly authenticated and shown to be kept in the ordinary course of business. To strengthen admissibility:

• Produce originals when available.
• Have record custodians or your accountant testify or provide affidavits about how records were maintained.
• Use contemporaneous entries—records created at the time of the transaction carry more weight than reconstructed memory.
• Provide corroborating evidence—bank statements that match invoiced amounts make a stronger case.

Common challenges and how to address them

• Inconsistent records: Reconcile differences between ledgers, tax returns, and bank deposits. A forensic accountant can help.
• Seasonal business: Document multi-year averages to show normal seasonal patterns.
• Proving causation: Use medical records and employer/client communications to link lost work to the injury rather than other factors.
• Overhead and net vs. gross: Insurers often dispute gross revenue claims. Show net profit after ordinary, ongoing expenses—damages typically focus on lost net earnings or lost earning capacity.

Practical steps to take right away

1. Preserve all business records and communications. Make digital backups.
2. Collect tax returns for at least the last two to three years.
3. Ask clients for written confirmations if they canceled work due to your injury.
4. Track all medical visits and obtain a clear work-restriction letter from your treating provider.
5. Contact an accountant experienced in forensic lost-earnings calculations.
6. Consider talking with a personal injury attorney before you give recorded statements to insurers.

Helpful Hints

• Start documenting losses immediately. The more contemporaneous and routine the recordkeeping, the stronger your claim.
• Keep a daily log describing work you could not perform and why. Include dates, estimated hours lost, and client names.
• Use tax returns to establish credibility: courts and insurers respect filed returns more than informal estimates.
• If you mix personal and business funds, clearly annotate business transactions and keep separate accounts going forward.
• Get an early opinion from a CPA or forensic accountant if your business records are complex or incomplete.
• Preserve evidence of reduced earning capacity: job offers you had to refuse, bidding proposals you could not complete, and lost contracts.
• Remember the statute of limitations; missing the filing deadline can bar your claim. See 42 Pa.C.S. § 5524.
• Consult an attorney early if the other side disputes causation, the amount of loss, or if the claim involves future earning capacity.

How an attorney or expert can help

An attorney can evaluate your claim, preserve evidence, handle communications with insurers, and calculate damages. A forensic accountant or vocational expert can produce calculations and expert testimony explaining your lost earnings and future loss of earning capacity to an insurer or jury.

Where to find Pennsylvania rules and guidance

For court rules and evidence procedures in Pennsylvania, see the Unified Judicial System’s resources on rules of evidence: Pennsylvania Rules of Evidence.

Disclaimer: This article educates on proving self-employed lost wages under Pennsylvania law. It does not provide legal advice, create an attorney-client relationship, or substitute for consulting a licensed Pennsylvania attorney about your specific situation.