Proof of Income Letter

A proof of income letter, or in simple terms “proof of income,” is a piece of written document that an individual presents to any business institution or organization (mostly banks and lending companies) to obtain something, oftentimes of monetary (loan, insurance, travel fund) and/or of physical value (gadgets, house, various types of transportation like cars and motorcycles, various types of bank products like credit and debit cards, various equipment used in construction and agriculture, etc.).

Proof of Income Letter for Self Employed Template

Proof of Income Letter Template

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A proof of income is basically created if a person wants something immediate. But for verification purposes and to see if the individual can actually pay the product (especially if there is a longer payment term), a proof of income is needed by the bank or other financial institution. You may also see formal letter examples and samples.

Listed below are some proof of income letters in PDF to guide when you will be submitting your own proof of income in the near future.

Proof of Income Documents You Can Submit

As long as you have a steady income, you can easily present numerous documents that are classified as proof of income.

Listed below are some items that banks and other investment or lending companies accept as proof of income documents, and are universally accepted around the world.

1. Payslip or pay stub

If you are employed, the best option you have as a proof of income is a payslip or pay stub. Employees are given their salaries or wages on a bimonthly basis.

Mostly, employees are paid on the 15th and 30th day of the month, while other companies release employee salary and wages on the 5th and 20th day of the month. Although there are employees who are also paid on a weekly basis, it all depends on the company on what wage schedule they are going to use. You may also like business proposal letter examples.

Oftentimes, the wage schedule depends on the performance of a company’s products and services, and also if sales targets are being met or exceeded by the products being sold by the company’s salespeople.

Most of the time, payslips or pay stubs are the documents being prioritized by banks especially if the individual requesting a loan or purchase of a product cannot present other products. Even if the individual presents other documents relating to his or her source of income, pay slips mostly provide the deciding factor if that person gets approved or rejected by the financial institution. You may also check out formal letter writing examples in pdf.

2. Tax return

Another document that is classified as a proof of income is a tax return. It does not really matter if you are employed or self-employed, an income tax return is very helpful when you will be submitting the document to your preferred financial institution.

Remember that the tax return that you will be submitting must be the most recent one as the financial institution will be doing a background check if you are really paying the correct amount of taxes. The financial institution will also check if you are still attached to the company listed in the tax return. You might be interested in notice letter examples.

Submitting an old tax return (for example, a 2012 tax return) will be immediately rejected by the bank, as well as your loan or request. Banks in most countries even reject tax returns that were accomplished in 2016, so make sure you submit the most recent one. Although it is not required to submit multiple yearly copies of your income tax return, you can always submit them if you want. You may also see application letter examples & samples.

For example, if you are employed from the year 2010, you can submit it together with the tax returns of succeeding years (i.e., 2010–2017). Submitting numerous tax returns will not increase or decrease your chances of getting the loan approved, as it will actually depend on the price of the product and your capacity to pay that product.

3. Income statement

If you are self-employed (having your own business that is registered under your name or together with other business partners), then your best option as a proof of income documentation is an income statement. Usually, business owners who request a loan use the funds for business expansion or other investment opportunities. For example, business owners use the funds to develop or improve an existing product or use the funds to venture into another industry.

Similar to the tax return, you should submit the latest income statement. Also similar to the tax return, most countries do not accept simple income statements that were accomplished in 2016. As much as possible, submit the 2017 version of your income statement. If you fail to provide a recent copy, it is better not to submit at all.

Remember to be ethical when creating your income statement. Even if you have your own accountant or hiring a third party to make all the financial statements for your company, input the correct details and avoid fraud as much as possible. Financial institutions will be verifying the information you entered in the income statement, so any discrepancies they see will not only result in the rejection of your request but you might be subject to criminal charges as well.

4. Bank statement

Another document that will come in handy as a proof of income is a bank statement. The bank statement lists down all of the transactions you made with the bank you opened an account with. The difference between a bank statement and a bank certificate is that the former lists down all the transactions (deposits and withdrawals) together with the current balance of your bank account while the latter only lists down the current balance of your account.

Between the two, the bank statement is a far more superior proof of income document as your every transaction is recorded which is very helpful for your loan or purchase request.

Take note that if you are requesting for a bank statement and you will be submitting the same document to the bank where you opened an account, make sure to submit other documents aside from the bank statement to increase your chances of getting the loan or financing request approved. You may also like email cover letter examples.

Normally, asking for a bank statement does not take a long time. You just have to approach any bank personnel and request for the said statement. For verification purposes, bank personnel will be asking for identification so make sure to bring valid IDs.

5. Certificate of employment

Certificate of employment is a document that entails that the employee is legally working for the company either on a regular, contractual, or probationary basis. The certificate of employment (COE) is written by the employee’s immediate supervisor or manager and enumerates the employee’s current position, start date, while also containing details on the purpose where the certificate of employment will be used for by the employee. You may also check out professional letter format examples.

The certificate of employment cannot act alone in terms of a proof of income document. It needs to be paired with a payslip or tax return so that the bank or financial institution can have information regarding your income.

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Proof of Income Pitfalls to Avoid

Before you submit your proof of income documents, check out these proof of income pitfalls that should be avoided at all costs.

1. Compile (and submit) the correct documents

It is vital that you compile the right documents as essentially, submitting the wrong ones will result to immediate rejection of your loan or financial request. As previously mentioned, submit the most recent documents especially for the tax return and simple income statement as most banks will not be accepting older versions of those said documents.

To avoid submitting incomplete or wrong documents, have a simple checklist on what documents you will be gathering. Also, have a separate column for the time frame you need for the documents that you will be gathering. If most documents can be gathered in one to two days, then there is no need to add a time frame column in the checklist.

2. Check the bank or lending institution’s profile

Submitting personal information to any institution or organization, let alone banks is always risky. That is why you need to check the profile of these financial institutions and determine if they are truly legitimate businesses. There is probably no need to be concerned about banks as they are constantly being monitored by the national government. You may also see simple resignation letter examples.

In regards to private financial or lending institutions, numerous cases of fraud have been reported with crime syndicates using financial institutions as fronts to conduct their illegal activities.

Before you disclose any personal information, check the organization’s business permits and other operational documents, and also monitor how their employees conduct their daily activities. If payment fees are too high, interest rates are too low, and sales personnel are too aggressive, you might as well avoid these types of companies and report to the relevant authorities if necessary. You may also like business reference letter examples.

3. Don’t submit the documents to the same bank twice

If your request got denied by the bank you submitted the requirements to, never submit the same documents to the same financial institution again. The bank will definitely not be accepting your documents and they might avoid having transactions with you in the long run. Rather, if you got denied the first time, go to another reliable financial institution instead and hope for the best.

As previously mentioned, check the financial institution’s profile before submitting your proof of income and other documents.

4. Check your capability to pay

Even if you were already granted a loan or financial request, this does not mean your responsibility with the bank is finished. If you are availing a long-term loan (for example, buying a car to be paid within five years), you definitely need to fulfill your financial obligations. You may also like offer letter examples.

If you fail to pay within the given time frame, the financial institution or business organization has the right to recover the item that you loaned, borrowed, or purchased. You might also get some jail time if you try to run from your obligations.

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How to Write a Proof of Income Letter

In transactions such as credits, loans, installments, and like, the presence of an income proof letter was never unusual. It is an official document used together with other attachments to validate or support your claim of the capability of paying. This paper could be done by your employer, an accountant, social security, or even you, yourself. Considering that proof of income letter is going to be used for legal purposes, it should contain the necessary pieces of information. To help you write your own letter of verifying your income, here are some steps you may follow.

1. Write your heading and date.

At the top of the paper, specify the different contact details about you. Include your name, house address, contact number, and email address. This will serve as your heading and will provide the reader with easier access to the return address. The same things apply for those that are self-employed. Just add the name of your business plus the essential details mentioned earlier.

The alignment of this section depends on the block style you are using and your preference. However, for a more formal approach, use the full block style, and indicate your contact details at the top left area of the page. Insert a blank line below it to separate it from the next segment. Moreover, do not forget to include the date when you wrote the letter after the heading. In some cases, when your company has a specific letterhead or stationery where the heading is already present, there is no need to write it again. However, you still need to indicate the date.

2. Write the recipient’s address.

Below the space you provided after the date, specify the address of your recipient. Just like your heading, include the necessary bits of information. However, this time, the details refer to the intended audience. If you want a specific person to be addressed in your letter, mention the name of that particular individual with his/her respective position in the company. Similarly, leave an empty line to separate this segment from the succeeding ones.

3. Briefly specify the purpose of the letter.

Like writing a memo, specifically, mention the reason for your letter writing. Taking the several purposes of a letter into account, giving the reader a hint on your intention will positively save them time and provide them with the notice of your paper’s significance. To do this properly, you may write a “RE:” which is a shorter term for regarding. This is then followed by the function of the document, which is income letter.

4. Have a courteous salutation.

A greeting or a salutation is the introductory portion of your letter’s meat. It establishes an impression to your reader; hence, keep it polite and ethically professional. Having a specific recipient, the most commonly used greetings usually begin with “Dear” or “To” which is then followed by the appropriate honorifics and the surname of the receiver. For example, “Dear Mr. Go” or “To Ms. Warner.” On the other hand, if you do not know the particular individual who will receive your letter, just use the standard, “To Whom It May Concern.”

5. Compose the introduction of the message.

In your opening sentences, introduce yourself first and elucidate the reason behind your submission of proof of income letter. It is crucial to mention these elements directly and straightforwardly. Considering that there could be more letter senders apart from you of different intentions, a blurry, ambiguous, and indirect introduction is a big “NO.”
For instance, you may state, “My name is Johannine Ann Rodriguez. I am writing this letter to verify my income in correspondence to my house loan application. Moreover, this letter will serve as a document to support my worthiness for approval.” Saying it as direct as possible would surely help your reader save time as well.

6. Mention your primary and additional income.

Inline to the sole purpose of the letter, outline the fundamentals of your money-making. In this segment, you need to clearly outline the amount of money you can make and how you make that money. You can mention your business or occupation here. Also, mention the length of time you’ve been making that much money or time duration you have been in your company. The expected time length that you can maintain your income. In this segment, never fabricate anything about your income. Besides, the person who will assess your letter would surely refer to some additional documents to verify your letter’s credibility as well.

For example, “I am the current sales manager of X company. I am working for this company for eight years already. My monthly compensation rate is $XXXXX. Moreover, I also own a small business, the X carwash shop. This establishment of mine is on service for five years now and earns about $XXXXX per month.”

7. Compose your conclusion.

In this portion, the principal mission is to summarize and specify your total income. It should also recommend how you will maintain or develop your assets. Your suggestions in this matter should be realistic and should have data that would support it. Never mention plans or expectations that do not have a strong background.

8. Indicate the attachments.

At the ending part of your letter should be a note indicating the presence of your attachments. This transitional section basically introduces your additional papers. You may request the reader to consider reading these attached files and examine them for verification purposes. This segment will also notify the recipient that there are still supplementary documentation they can refer to if necessary.

9. Thank the reader.

As a practice of ethics, show your appreciation for the reader’s consideration of examining your paper. This act does not mean that you need to buy him/her gifts. A simple “Thank you.” will do.

10. Close your letter, courteously.

Also known as “sign-offs,” closing your letter is equally important as opening it. Closing remarks also vary based on the level of formality and function. Some are for less professional purposes such as “Warmly,” “Many thanks,” “Yours truly,” and “Cheers.” At the same time, there are also for professional occasions such as “Best,” “Sincerely yours,” “Best regards,” “With gratitude,” and “Regards,” Basically, since you are writing for a formal address, it is appropriate to utilize a professional sign-off, too.
After indicating this, do not forget to provide two empty lines before suggesting your name, notably, if you are going to print out your letter. This is to contain your signature.

11. Include enclosure under your name.

Given that you already introduced that there are additional documents attached in this letter, this is the section where you can specify all of them. In other words, name all of the supplementary materials in this part.

12. Add a disclaimer.

According to the definition of law, a disclaimer is an act of rejecting another’s claim or relinquishing one’s own. This portion is vital to indicate that all the details mentioned above are authentic relating to your belief, knowledge, perception. Disclaimers are, in fact, optional in writing a letter; however, including it in your own provides an impression of sincerity and professionalism towards its readers.

13. Sign the letter.

Especially if the document is printed, marking the letter with your signature should be the grand finale. On the spaces you provided between your sign-off and your name, there is the portion you need to sign the letter and nowhere else. Signature in email letters is not a prerequisite unless mandated.

So, there you go. We hope you found this article to be informative as well as helpful when you are gathering your proof of income documents and submitting them to financial institutions. We also listed several materials that can be classified as proof of income documents as well as proof of income pitfalls to avoid. You may also see recommendation letter examples & samples.