Proving Lost Wages as a Self-Employed Person After an Accident in Delaware

If you are self-employed in Delaware and you miss work because of an accident caused by someone else, you can seek compensation for lost earnings and lost business profits. Insurers and courts will expect clear, convincing documentation showing what you earned before the accident, how the accident reduced your income, and what portion of that loss was caused by the injury. The process looks different for wage employees versus self-employed persons because businesses have expenses, seasonality, and variable income. Below is a practical, step-by-step explanation of how to prove lost wages and lost profits as a self-employed person.

What kinds of income losses can you claim?

• Net lost earnings (net profit you would have taken home after ordinary business expenses).
• Lost gross receipts if your claim focuses on decreased sales, plus proof of increased costs if any.
• Lost future earnings or loss of earning capacity when an injury reduces your long-term ability to work.
• Value of household services you used to provide (if your injury kept you from performing essential home duties).

How insurers and courts generally calculate self-employed lost wages

Courts and insurers typically try to measure the plaintiff’s lost net earnings—what you would reasonably have received as income minus the ordinary expenses saved because you didn’t work. You should not claim gross revenue without accounting for expenses that would have stayed with the business. The typical approach:

1. Establish baseline income using previous years’ records (tax returns, profit & loss statements, invoices).
2. Calculate the expected income for the lost period using averages adjusted for seasonality and growth.
3. Subtract the business expenses you did not incur because you did not operate during the recovery period (fuel, subcontractor pay, materials).
4. Show the net loss attributable to the accident.

Documents and evidence to collect (start immediately)

Collect contemporaneous, verifiable records. The stronger and more consistent the documentation, the better your claim will be.

• Federal income tax returns (Schedule C) for the prior 2–5 years.
• Business profit & loss statements and balance sheets.
• Invoices, receipts, and 1099s showing client payments and gross receipts.
• Bank statements and merchant account deposits that show actual money received.
• Accounting software reports (QuickBooks, Xero) and ledgers documenting revenue and expenses.
• Signed contracts, quotes, purchase orders, or canceled jobs that show lost opportunities.
• Communications with clients showing cancelled or postponed work (emails, texts, letters).
• Daily logs, appointment calendars, project schedules, or time-tracking records showing work you would have done.
• Receipts for business expenses and receipts that you saved because of not working.
• Medical records, work restrictions, and doctor’s notes linking inability to work to the accident.
• Photos or inspection reports that show damage to property or tools that affected your ability to work.

Practical example (hypothetical)

Suppose over the last three years your net annual earnings (after business expenses) average $60,000. After an accident you miss three months of work. If your normal net monthly income is $5,000, your baseline lost income is $15,000. If during those three months you saved $2,000 in costs (materials, subcontractor fees you didn’t pay), your compensable loss would be about $13,000 (pre-tax). You would support that figure with tax returns, bank deposits, invoices, and statements showing saved expenses.

Common challenges and how to address them

• Variable income: Use multi-year averages and explain seasonality. Provide historical records to show patterns.
• Business overhead: Show which expenses persist even if you don’t work (rent, insurance) and which expenses were avoided (materials, hourly subcontractors).
• Personal vs. business funds: Keep clean records separating business income/expenses from personal withdrawals.
• Speculative future earnings: Use documented contracts, client testimony, or business records to support future-loss claims. Avoid guessing.
• Insurer disputes: Be ready to support your numbers with contemporaneous evidence and a clear method of calculation.

When to bring professional help

Consider hiring a certified public accountant, forensic accountant, or vocational assessor to prepare a formal earnings analysis if your losses are large, your business finances are complex, or the insurer disputes your claim. These professionals can produce reports showing how you calculated lost income, adjusting for expenses and taxes. Attaching a well-documented report to your demand letter makes a settlement or court presentation much stronger.

What to expect in settlement negotiations or court

Expect the insurer or defendant to scrutinize your records. They may request tax returns for several years, bank statements, business ledgers, and client statements. Be prepared to explain adjustments you made for saved expenses, seasonal swings, and one-time gains or losses. Courts prefer objective records over memory-based testimony.

Immediate steps to protect your claim

1. Seek medical care and keep all medical records that tie symptoms and work restrictions to the accident.
2. Notify your insurer and the at-fault party’s insurer as required.
3. Start collecting business records listed above; make copies and secure backups.
4. Keep a contemporaneous journal of missed work, canceled appointments, and client contacts.
5. Preserve electronic communications and calendar entries relating to work and cancellations.
6. Consult a Delaware personal injury attorney promptly to understand time limits and local practice.

How your recovery is taxed

Compensatory damages for lost earnings are generally taxable as income. However, the tax treatment of a settlement or award can be complex and depends on what components the payment represents (medical expenses, lost earnings, pain and suffering). Consult a tax professional to understand tax reporting and plan accordingly.

Disclaimer: This article provides general information only and does not constitute legal advice. Laws and procedures can change and vary by situation. Consult a licensed Delaware attorney for advice about your specific case.