Proving Lost Wages After an Accident When You’re Self-Employed (Michigan)

Short answer: To prove lost wages as a self-employed person in Michigan you must assemble contemporaneous business records (tax returns, invoices, bank deposits, ledgers), create a reliable before-and-after earnings comparison, document the time you could not work, and back your calculation with supporting evidence—often a forensic accountant or vocational expert. Timely notice and meeting deadlines for claims is also crucial. This page explains what to collect, how to calculate loss, and how Michigan law treats wage-loss claims.

Disclaimer

This information is educational only and is not legal advice. Consult a licensed Michigan attorney about your specific situation.

Understanding the legal context in Michigan

How you prove lost wages depends on the type of claim:

• Automobile no-fault claims (PIP/wage-loss benefits) are governed by Michigan’s No-Fault Law (part of the Insurance Code). See MCL 500.3101 et seq. for the No-Fault Act and the wage-loss benefit provisions. For example, see MCL 500.3107 for benefit rules. (MCL 500.3107).
• Third-party tort claims (suing the person who caused your injury) are separate. Michigan generally imposes a three-year statute of limitations for personal injury claims. See MCL 600.5805. (MCL 600.5805).

Knowing which route you pursue (no-fault versus third-party) affects what benefits are available, how to document losses, and what deadlines apply.

What “lost wages” means for self-employed people

For wage-loss purposes, insurers and courts focus on lost earned income or lost business profits you reasonably would have earned but for the accident. That means you must show both:

1. That the accident prevented you from doing billable work or otherwise earning income during a measurable period; and
2. How much income you actually lost because of that inability to work.

Core documents and proof to assemble

Collect everything that shows earnings before and after the accident and that links your work activity to income:

• Tax returns: Full federal tax returns (Form 1040) with Schedules C, E, or K-1 for the past 2–3 years. These show reported net profit or loss and establish a baseline.
• Profit & loss statements: Monthly or quarterly P&L statements from your accounting software or manual ledgers for the year of injury and prior years.
• Invoices and client contracts: Outstanding invoices, contracts you could not complete, and statements of work that link time to pay.
• Bank & payment processor records: Deposits to business checking, Stripe/PayPal/QuickBooks receipts, and cancelled checks showing income flow.
• Calendars and appointment logs: Records showing scheduled work you missed—emails, calendars, time logs, and appointment books.
• Expense records: Receipts and bills that help separate variable costs you saved while not working (important for net-profit calculations).
• Advertising & lead records: Ads, proposals, and communications showing lost opportunities.
• Client statements or affidavits: Signed statements from clients confirming canceled jobs or hours lost because of your injury.
• Contemporaneous notes: Daily logs or journals you kept documenting inability to work.
• Expert reports: For complex losses, a forensic accountant or vocational expert can reconstruct earnings and produce a report admissible to insurers and courts.

How to calculate lost income (practical method)

There is no single mandatory formula, but common methods include:

1. Average-net-income method: Take your average net profit (after allowable business expenses) for an appropriate prior period—commonly the last 12 months or 2–3 years—and multiply by the fraction of time you could not work.
2. Actual invoiced-loss method: Total the invoices and contracts you would have completed but were unable to finish because of injury.
3. Reconstruction method: Use bank deposits, receipts, and calendar entries to reconstruct month-by-month income.

Important adjustments:

• Subtract variable costs you avoided by not working (materials, subcontractors). The goal is to show lost net income / profit, not gross revenue unless the insurer requires otherwise.
• Account for seasonality—if your income fluctuates, use seasonal averages rather than a single month.
• Include self-employment taxes and benefit impacts when computing actual personal loss.

Evidence quality: what persuades insurers and courts

Strong proof is contemporaneous and objective. The most persuasive items are:

• Filed tax returns and bank deposits.
• Signed client cancellations and refund communications.
• Accounting software export (QuickBooks, Xero) showing P&L and invoices.
• Independent expert opinion reconstructing lost income and confirming reasonableness.
• Consistent, contemporaneous time logs or calendar entries.

Common problems and how to avoid them

• Not keeping records: Start keeping detailed records immediately after the accident. Retroactive, unaudited estimates are weaker.
• Mixing personal and business funds: Keep business accounts separate and produce clear bank records.
• Inflated claims: Be conservative and support every item with documentation—overstated claims are easy to discredit.
• Missing deadlines: Know the applicable deadlines (no-fault claim procedures or the three-year tort statute of limitations) and file on time.

When to use an expert

Hire a forensic accountant or vocational economist when your records are complex, your business has irregular cash flow, or the opposing insurer disputes your numbers. An expert will:

• Reconstruct earnings from imperfect records.
• Prepare a clear report and calculation admissible in court or arbitration.
• Testify at deposition or trial if necessary.

Procedural steps in Michigan

1. Document everything now. The earlier you start, the stronger the proof.
2. Notify the insurer and the at-fault party (if required). For auto accidents, follow your insurer’s PIP and wage-loss claim process under Michigan’s No-Fault Act (MCL 500.3101 et seq.).
3. Compile tax returns (2–3 years), P&L statements, invoices, and bank records.
4. If the insurer denies or disputes the claim, consider hiring a lawyer early—especially if the claim is large or complex.
5. If you sue a third party, remember Michigan’s personal-injury statute of limitations (see MCL 600.5805).

Sample documentation checklist (start this today)

• Last 3 years of federal tax returns (with Schedules C/E/K-1)
• Year-to-date and prior-year P&L statements
• Copies of all invoices, paid and unpaid
• Bank statements showing deposits and business-related expenses
• Contracts or client engagement letters
• Calendar entries, emails, and texts confirming canceled work
• Receipts for costs saved while out of work
• Affidavits or statements from clients confirming lost work
• Written estimate from a forensic accountant (if used)

When to talk to an attorney

Consult a Michigan attorney if:

• The amount in dispute is significant.
• Your records are incomplete or messy.
• The insurer denies wage-loss benefits or disputes your calculation.
• You face a statute of limitations deadline or complex lien/offset issues.

Helpful Hints

• Start documentation immediately—contemporaneous records beat retrospective estimates.
• Use accounting software and export monthly reports to create an audit trail.
• Keep business and personal accounts strictly separate.
• Conserve emails, text messages, and calendars that show missed bookings.
• Get written confirmations from clients about cancelled jobs or lost hours.
• Be honest and conservative when estimating lost income—accuracy builds credibility.
• If you expect long-term loss of earning capacity, plan to document projected future losses with an expert report.
• When filing an auto-related claim, reference Michigan’s No-Fault statutes early and follow insurer PIP procedures.
• Ask about attorney contingency fees—many attorneys handle lost-wage claims on contingency, which can reduce up-front costs.

If you want, I can outline a sample earnings-reconstruction worksheet you can use with your records, or a short checklist to give to a forensic accountant. Again, this is general information and not legal advice—contact a Michigan-licensed attorney for guidance tailored to your facts.