Detailed answer — how to document and prove lost earnings as a self-employed worker in Washington

If an accident prevents you from working or reduces your ability to earn money, you can recover lost income (damages) from the at-fault party or an insurer. Washington law requires that lost-earnings claims be proven with reasonable certainty, not speculation. In practice that means you must show objective, contemporaneous, and persuasive records that tie the injury to specific lost revenue, and explain how you calculated the amount claimed.

1. Understand what you can claim

• Direct lost profits (net income) from missed jobs or fewer clients.
• Lost gross receipts in some contexts, if your business model supports it, but courts usually focus on net earnings (profit) rather than gross revenue.
• Future lost earning capacity if the injury causes long-term impairment; those require a reasonable projection and expert support.
• Associated costs (e.g., extra fees to hire help you couldn’t perform yourself) and incidental losses tied to the injury.

2. Key Washington law to keep in mind

Personal-injury claims in Washington have time limits and follow established damage principles. For example, the statute of limitations for many personal-injury actions is set by Washington law; check RCW 4.16.080 for the statute governing actions for injuries to the person. See: RCW 4.16.080. If your injury is work-related and covered by the workers’ compensation system, RCW Title 51 describes that process (see RCW Title 51), but many self-employed persons are not covered by workers’ compensation and must pursue third-party claims instead.

3. Types of evidence Washington courts and insurers expect

Collect multiple, independent sources of documentation. The stronger your contemporaneous and objective records, the better your claim will be received.

• Tax returns: Federal returns (Form 1040 with Schedule C, or business tax returns for partnerships/LLCs) for several prior years show baseline income and trends.
• 1099s/W‑2s: 1099‑NEC or 1099‑MISC forms showing payments received from clients.
• Profit & loss (P&L) statements: Detailed P&L reports from accounting software (QuickBooks, Xero) showing gross receipts, expenses, and net income.
• Bank and merchant statements: Deposits and credit-card receipts that corroborate revenue.
• Invoices and contracts: Signed contracts, purchase orders, and invoices for jobs you could not perform and for refunded/cancelled work.
• Calendars and appointment books: Contemporaneous calendars showing scheduled work you missed and any cancellations or reschedules caused by the injury.
• Communications with clients: Emails, texts, and messages documenting client cancellations, lost projects, or delayed start dates attributable to your injury.
• Receipts for expenses saved or incurred: Show which business expenses you avoided (e.g., subcontractor not hired) and which new expenses you incurred because of the injury.
• Affidavits/Statements: Written statements from clients, vendors, or a business partner confirming lost jobs or reduced hours.
• Time logs and work records: Timesheets, job logs, or project tracking that show how much work you normally performed and what you missed.
• Forensic accountant/CPA report: An expert who reconstructs income and quantifies lost profits can convert messy records into a clear lost-earnings calculation.

4. How to calculate lost earnings (practical methods)

Choose a method that best fits your business type and the available records. Common approaches include:

1. Actual lost invoices method: Add up verified invoices and deposits that were never completed because of the injury (strong when you have cancelled contracts or client statements).
2. Year‑over‑year comparison: Compare the period after the injury to the same period in prior years to show lost revenue above normal fluctuations.
3. Average daily/weekly rate: Use prior revenue to calculate a typical daily or weekly income and multiply by missed workdays (adjust for seasonality or growth).
4. Projected earnings method: For lost future earning capacity, prepare a reasonable projection based on past growth, adjusted for market conditions and supported by an expert.

Always deduct business expenses that would have continued or been avoided during the lost period. Courts usually focus on net profit loss (revenue minus business expenses) unless jurisdiction or insurer rules specify otherwise.

5. Dealing with uncertainty and the “reasonable certainty” standard

Washington courts require lost-earnings evidence to be reasonably certain; you cannot recover speculative amounts. To meet this standard:

• Use contemporaneous documents rather than reconstruction from memory.
• Provide multiple supporting records that corroborate each other (e.g., invoice + bank deposit + client email).
• Have a qualified accountant prepare a clear reconciliation from gross revenue to net lost profits.
• Explain assumptions used for projections and show why they are realistic.

6. When to hire professionals

Consider professionals when records are incomplete, when the lost-earnings number is significant, or when a long-term disability claim requires expert opinions:

• Certified Public Accountant (CPA) or forensic accountant — reconstruct income, prepare P&L, and provide an affidavit or expert report.
• Medical professionals — to link the injury to the inability to work and to provide prognosis for future earning capacity.
• Employment or industry experts — to explain industry norms and validate projected losses.

7. What to expect from insurers and defense lawyers

Insurers will scrutinize your records. Expect them to ask for tax returns, bank statements, invoices, and proof of mitigation. They may depreciate projections, dispute expense allocations, or argue that you failed to mitigate your losses. Strong, well-documented proof and expert support reduce these challenges.

8. Sample evidence checklist (practical pack you can assemble)

• Last 3–5 years of federal tax returns and business returns.
• Profit & loss reports and balance sheets for the year of injury and prior year.
• Copies of all invoices, contracts, and client communications for the lost period.
• Bank statements and merchant processor reports for the relevant months.
• Calendar entries and time logs showing missed work.
• Receipts for expenses saved or newly incurred.
• Affidavits from clients confirming cancellations or delays.
• Written work‑capacity statements from your treating medical provider.
• Expert accounting report (if available/applicable).

9. Practical example (hypothetical)

Imagine you are a self-employed photographer who normally earns $4,000/month net. You sustain an injury and miss three months of work. You produce prior-year tax returns showing consistent $48,000 net income; invoices and signed contracts show that three sessions totaling $9,000 were canceled because of your injury; bank statements show no deposits for those jobs; and a treating doctor confirms you could not work for those months. A CPA prepares a report reconciling historic income to the lost months and calculates lost net profit as $12,000 (3 months x $4,000). These combined records give insurers or a court a strong, non‑speculative basis for the claim.

10. Next steps and practical tips

Start gathering records immediately. Preserve digital files, export accounting reports, and ask clients for written confirmation of cancellations. If you expect a significant claim or run into disputes, consult a Washington personal-injury attorney and consider hiring a forensic accountant.

Helpful Hints

• Keep contemporaneous records — calendar entries and client messages are often the most persuasive evidence.
• Use your tax returns to show baseline income; insurers respect filed returns more than memory or estimates.
• Track both gross receipts and deductible business expenses so you can show net lost income accurately.
• Document mitigation efforts — show attempts to rebook work, subcontract, or otherwise reduce losses.
• Obtain a clear medical work‑restriction letter from your provider linking your inability to work to the injury.
• Ask a client for a short email explaining why a job was canceled — third‑party confirmation is powerful.
• Consult an accountant early — reconstructing income later is harder and more expensive.
• Act promptly — personal injury claims have time limits. See: RCW 4.16.080 for limitations on actions for personal injuries.