FastCounsel

Overview

If you run your own business, proving lost wages after an accident requires showing the income you actually lost because you could not perform billable work or manage the business. Insurance adjusters, judges, or juries will look for objective, verifiable records that link your medical condition and time away from work to a reduction in your net business income. This article explains the types of evidence that commonly work in Utah claims, how to calculate lost income, and practical steps to present a clear claim.

Disclaimer: This information is educational only and does not constitute legal advice. For advice about your specific situation, consult a licensed Utah attorney.

Detailed answer: What counts as lost wages for a self‑employed person and how to prove them

1. Understand what “lost wages” means for self‑employed people

Insurers and courts focus on net lost earnings (what you would have kept after ordinary business expenses), not gross sales. For many self‑employed claimants, the starting point is the business net profit you report on your federal tax returns (Schedule C, S‑Corp K‑1s, partnership K‑1s, or corporate payroll/W‑2 if you paid yourself a salary). Adjustments may be needed to reflect the income you actually would have earned during the missed period.

2. Gather contemporaneous and historical financial records

Collect multiple forms of objective documentation from before and after the accident so you can show a clear pattern and the decline caused by the accident. Useful records include:

• Federal tax returns (last 2–3 years) including Schedule C, Form 1040, K‑1s, or corporate returns.
• Profit & loss (P&L) statements and balance sheets produced by your accounting software or accountant.
• Bank and business account statements showing deposits and payments.
• Invoices, receipts, contracts, and unpaid invoice logs for work you lost or could not complete.
• 1099‑NEC / 1099‑MISC forms showing payments received for contract work.
• Detailed calendars, email threads, texts, or client messages showing scheduled work, cancellations, or rescheduling due to your injury.

3. Link the injury to your inability to work

Medical evidence is essential. Provide:

• Medical records documenting diagnosis and treatment.
• Physician notes stating work restrictions or periods you were unable to perform regular duties.
• Physical therapy notes and documentation of follow‑up visits that show ongoing impairment.

Combine medical records with your work records (appointments cancelled, projects delayed) to show causation: that the accident and resulting injuries directly caused the loss in income.

4. Calculate past lost income (concrete example)

Example hypothetical: A self‑employed consultant averaged $6,000 per month net (based on the last two years’ net profits). After the accident the consultant missed four weeks of billable work and accepted only limited remote tasks that brought in $1,500 that month.

• Typical monthly net: $6,000
• Actual net in month of injury: $1,500
• Past lost income for that month: $6,000 − $1,500 = $4,500

Use averaged monthly net income from prior years if income varies seasonally. Where appropriate, adjust for trends (growth or decline) by averaging multiple years or using an accountant to prepare a pro‑rata calculation.

5. Claim future lost earning capacity if applicable

If your injuries cause long‑term reductions in your ability to earn, you may claim future lost earnings or lost earning capacity. Courts and insurers expect expert support for future losses. Useful evidence includes:

• Vocational expert reports that compare pre‑injury duties to post‑injury abilities.
• Forensic accountant or CPA reports projecting future income losses based on historical business performance and realistic recovery timelines.
• Medical opinions explaining probable long‑term restrictions and their effect on your work.

6. Demonstrate mitigation and reasonableness

Show the steps you took to reduce losses: attempting remote work, delegating tasks, accepting reduced‑pay assignments, or hiring temporary help. Insurers reduce awards if you unreasonably failed to mitigate damages.

7. Use sworn statements and third‑party confirmations

Ask clients, vendors, or subcontractors to provide short signed statements confirming canceled work, missed deadlines, or lost business because of your inability to perform. An independent CPA’s sworn analysis of your lost profits carries weight with adjusters and courts.

8. Present the claim clearly to insurers or opposing counsel

Organize a chronological packet: summary of claimed lost wages, supporting tax and accounting documents, invoices and cancelled work evidence, medical records linking incapacity to work, and any expert reports. Include a cover letter explaining your methodology for calculating losses (net income basis, adjustments, and mitigation steps).

9. Common documentation pitfalls to avoid

• Sending only gross sales figures without accounting for business expenses.
• Relying on informal recollection without contemporaneous records.
• Mixing personal and business account statements without clear separation.
• Failing to produce tax returns when asked by insurers — they often request them to verify income.

Helpful hints — quick checklist before submitting a lost‑wages claim

• Start collecting documents immediately: the more contemporaneous the records, the stronger the claim.
• Use at least two years of tax returns to establish an income baseline; three years is better for seasonal businesses.
• Provide a clear net‑income calculation: show gross receipts, ordinary business expenses, and net profit.
• Ask your treating doctor to put work restrictions and incapacity dates in writing.
• Have a CPA prepare a concise lost‑income report if your claim involves complicated accounting, seasonal swings, or projected future losses.
• Keep a daily log of how your injury affected your work capacity and what you did to try to earn income.
• Preserve client communications that document cancelled projects or lost opportunities tied to your injury.
• Don’t sign any release or settlement until you understand whether it fully compensates past and future lost earnings; consider getting legal help to evaluate any offer.

If your business structure is complex (multiple partners, S‑Corp distributions, or significant business assets) or the insurer disputes your methods, consult a Utah attorney who handles personal injury and economic damages claims and consider engaging a forensic accountant or vocational expert.

Reminder: This article provides general information about typical evidence and strategies. It is not legal advice. For help applying these principles to your case, consult a licensed Utah attorney.