Proving Lost Income for a Self-Employed Person After an Accident in Vermont

Short answer: To persuade an insurer or a court you lost income as a self-employed Vermonter, gather contemporaneous business records (tax returns, bank statements, invoices, appointment logs), show your historical earnings pattern, document how the accident prevented you from working, and use a clear calculation of lost earnings (with net profit and reasonable projections if losses are future). Preserve records, get bookkeeping or tax help if needed, and be ready to explain and authenticate your records under Vermont evidence rules. This is general information, not legal advice.

Detailed answer — what to collect and how to prove lost income

1. Understand what you must prove

In most Vermont civil claims you must show by a preponderance of the evidence that (1) you earned income from a business, (2) the accident caused you to lose the ability to earn that income, and (3) the amount you claim is reasonable and supported by records. For insurers you must also show that you made reasonable efforts to reduce your losses.

2. Essential documents and records to gather

• Income tax returns (individual and business Schedule C or K-1) for the prior 2–3 years to show historical earnings and seasonal patterns.
• Business bank and merchant account statements showing deposits and client payments.
• Invoices, receipts, contracts, estimates, or work orders evidencing expected income that was lost.
• Accounting records: profit & loss (P&L) statements, general ledger, bookkeeping reports, and cash-flow statements.
• Appointment calendars, client emails/texts, canceled bookings, and messages showing missed work or canceled jobs because of the accident.
• 1099 forms or other documents showing gross payments received from clients.
• Receipts for ordinary and necessary business expenses so you can show net loss (gross revenue minus deductible expenses).
• Payroll records or subcontractor invoices if you normally pay others and had to reduce or cancel those costs.
• Medical records and physicians’ notes describing functional limits and recommended time out of work.
• Photographs, progress reports, emails, and witness statements from clients or subcontractors corroborating lost bookings or delays.

3. How to calculate the loss

Two common approaches used in claims and litigation:

1. Net income approach: Use your historical net profit (gross receipts minus ordinary business expenses) to show what you would have earned but for the accident. Use tax returns and P&L statements for proof. This is the most common measure for sole proprietors and small businesses.
2. Gross-receipts or lost-contract approach: If you can show specific contracts or bookings that you definitively lost (with deposits, signed agreements, or client emails), present the gross revenue tied to those jobs and subtract the costs that would have been avoided.

For short-term losses, compare a defined pre-accident average (for example, monthly net income for the same months in previous years) to actual income during recovery. For future losses, prepare a reasoned projection based on past patterns, physician restrictions, and business plans; these projections typically require support from an accountant or financial analyst.

4. Authentication and admissibility of records in Vermont

Business records and tax returns are commonly admitted as proof of earnings, but you must authenticate them. Vermont’s rules allow admission of regular business records under the business-records exception to the hearsay rule. See the Vermont Rules of Evidence (search or consult the rules) for the business-records exception and the requirements for authentication and foundation: a custodian or qualified witness should be prepared to explain how the records were kept and that they were kept in the ordinary course of business. The Vermont Rules of Evidence are available from the Vermont Judiciary: https://www.vermontjudiciary.org/sites/default/files/documents/Vermont%20Rules%20of%20Evidence.pdf

5. Using tax returns

Tax returns (including Schedule C) show reported income and business expenses. They provide a baseline but may understate or overstate economic reality (timing differences, tax deductions, or personal expenses run through the business). If you rely on tax returns, explain any discrepancies and provide supporting bank records and ledgers.

6. Corroboration — why contemporaneous evidence matters

Contemporaneous records (invoices, client cancellations, emails, appointment logs) carry more weight than recollection alone. Keep and preserve original documents and create a clear timeline showing when jobs were lost and why you could not perform them because of medical restrictions from the accident.

7. Independent analysis and testimony

A certified public accountant (CPA) or forensic accountant can prepare a calculation of lost earnings and explain methodology. A treating physician or vocational specialist can explain functional limits preventing work. Be aware that opposing parties can challenge methodology, so choose transparent, conservative calculations that tie directly to records.

8. Mitigation and duty to reduce losses

You should try to reduce losses where reasonable (for example, take light-duty work you can do safely or subcontract work you cannot perform). Insurers and courts will reduce awards or offers if you unreasonably failed to mitigate losses.

9. Presenting the claim to an insurer or in court

• Create a one-page summary that states the period of lost earnings, the calculation method, and the total claimed. Attach supporting documents in chronological order.
• Provide tax returns and P&L statements under a written request or protective order if privacy is a concern.
• Prepare sworn statements from clients or subcontractors if they can confirm cancellations or lost work.
• Keep copies of every communication and avoid making admissions in writing that could hurt your claim (e.g., speculation about cause or future earnings).

10. When to get professional help

Consider a CPA for bookkeeping and lost-income calculations if your records are complex. Consider legal help if the insurer denies the claim, offers an inadequate settlement, or the claim involves significant future lost earnings. A lawyer can handle depositions, subpoenas, and settlement negotiations and can coordinate necessary expert reports.

Practical example (hypothetical)

Maria runs a home-based landscaping business and averaged $4,000 net per month over the last two years (shown on tax returns and bank deposits). After a car accident, a doctor ordered six weeks of no heavy lifting. Maria lost three scheduled large contracts worth $9,000 gross and avoided $2,000 of related expenses. Using the net-income approach, Maria documents:

• Tax returns for the past two years.
• Signed contracts and client emails showing cancellations totaling $9,000.
• Bank deposit records and invoices showing reduced deposits during recovery.
• P&L showing average monthly net income of $4,000 for baseline.
• Calculation presented: 3 months of lost net income ($4,000 x 3 = $12,000) minus avoidable expenses ($2,000) = $10,000 claimed loss, supported by contracts and bank records.

Key Vermont and federal resources

• Vermont Rules of Evidence (business-records exception and authentication): https://www.vermontjudiciary.org/sites/default/files/documents/Vermont%20Rules%20of%20Evidence.pdf
• Vermont Department of Taxes — for filing and tax-record help: https://tax.vermont.gov/
• IRS information about self-employment reporting and Schedule C: https://www.irs.gov/forms-pubs/about-schedule-c-form-1040

Important reminder and next steps

Keep all original documents intact. Make digital backups (scans/photos) with dates. Create a concise, documentary packet showing baseline earnings, the effect of the accident, and your calculation. If the claim is large or disputed, consult a Vermont attorney and a CPA for tailored advice and to prepare any required exhibits or expert reports.

Disclaimer

This article explains general principles and common practices for documenting lost income as a self-employed person in Vermont. It is for informational purposes only and does not constitute legal advice. For advice about a specific situation, consult a licensed Vermont attorney.

Helpful Hints

• Start preserving records immediately after the accident—contemporaneous evidence is most persuasive.
• Use bank and merchant statements to verify deposits if invoices don’t match receipts.
• Document communications with clients about cancellations and rescheduling.
• Separate personal and business expenses now if you have mixed records—this improves credibility.
• Get written work restrictions from treating health-care providers to tie time off to medical necessity.
• Keep a recovery diary (dates, symptoms, work limitations) to support your claim if memory becomes contested.
• When in doubt, get a CPA to prepare a clear P&L and a conservative lost-earnings calculation you can rely on during settlement talks or litigation.