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Proving Lost Wages After a Car Accident When Self-Employed

According to the Michigan State Police, car accidents resulted in over 60,000 injuries in 2020 alone. These can happen to anyone. If you are injured, you may be temporarily or permanently unable to return to work. If you are self-employed, this situation can lead to a scary sense of financial instability. Yet, you may be entitled to lost wages or lost income compensation following the accident. Call our Michigan car accident lawyers to discuss your options and start processing your claim today.

Are You Considered Employed or Self-Employed?

Working relationships are often complicated today, and the border between employment and self-employment can become blurred. While there is not always a clear distinction between the two, a person can be considered self-employed if they meet some or all of the following criteria:

  • You set the number of hours you work and when those working hours occur.
  • You use your own resources and tools for jobs.
  • You are responsible for providing a service and for the methods in which you provide such service.
  • You directly collect payments for your services from those you are providing the services.

While not all of these may apply to you, they give you an idea of what constitutes self-employment. If you consider yourself an independent contractor, freelancer, or sole proprietor, deciding where and when you will work, you will most often be regarded as self-employed. If not, and you must report to an employer concerning your work, receive paid time off (PTO), sick days leave, or vacation days, then you are employed. If you need assistance determining which category you fall under, seek the legal advice of a trusted Michigan car accident lawyer.

Who Qualifies for a Lost Wages Claim After a Car Accident in Michigan?

firefighters responding to a car accident

A lost wages claim is intended to cover the wages lost due to a personal injury sustained during an auto accident, regardless of whether you are the at-fault driver. This claim is calculated based on what you would have earned over a specific period of time if you had not sustained car accident injuries that caused you to be unable to work.

Both employees and self-employed individuals are eligible for lost wages in Michigan. However, a slightly different approach will be necessary for self-employed people. You will not have an employer to provide proof of work status, wage verification (e.g., pay stubs), and proof of time away from work due to the accident. Instead, you will need to compile this information yourself.

Such claims require diligent effort. You must be able to provide documentation from a medical professional that indicates your medical condition and that it resulted in your inability to work. Your documentation will serve as evidence in car accident cases and needs to be as thorough as possible so that there is no question about what benefits you deserve. Income tax returns showing annual income are one way to prove what you would have earned if you had not been injured.

What is Lost Income for Self-Employed Workers?

Lost income or lost wages is the amount of work income an individual would have earned during the three years immediately following the accident date had they not sustained a bodily injury. It is a precise calculation made when assigning wage loss benefits. Lost income does not include lost earning capacity, as that is an entirely different type of claim.

For contractors, gig workers, and other types of self-employment, Michigan law specifies that wage loss benefits are commensurate to the worker’s net income, calculated by deducting business expenses from gross income. However, which business expenses get deducted from a self-employed person’s gross earnings is decided on a case-by-case basis.

While you may include a variety of business-related expenses on your Schedule C, there is the potential that only certain expenses will be deducted from your gross income when calculating lost income as a self-employed worker under Michigan’s no-fault laws.

Michigan’s no-fault insurance laws state that if you sustain injuries in a car accident, regardless of if you were the at-fault party, you are entitled to 85 percent of your lost wages, tax-free, for up to three years after the date of your accident. This 85 percent has a monthly maximum of $6,615 as of October 2022. The monthly maximum changes annually, and the increase is based on the inflation rate.

However, when it comes to such a wage loss request under a car accident claim, insurance companies often make it difficult for self-employed workers to obtain the level of benefits they are entitled to and deserve. For help determining if you should seek lost wages following an accident with severe injuries and calculating lost income as a self-employed worker, seek the legal advice and assistance of an experienced Michigan car accident attorney.

How Do I File a Lost Wages Claim in Michigan if I Am Self-Employed?

A doctor looking at a patients leg

In order to receive your lost wages benefits, you must file a no-fault application within one year of your accident date.

Along with this filing, you will need to provide a work disability certificate from your doctor, backed up by the medical records of your injury case, paid and unpaid medical bills, and proof of medical treatment. You will also need to include proof of income before your accident. For a self-employed person, this could be previously filed taxes, client invoices, business receipts, bank statements, or other such financial documentation. The more documentation you can provide, the more likely you will receive adequate compensation.

Federal and state income tax returns for the year of the crash and the prior two to three years are typically included to build a solid claim in Michigan. These returns are key to the money you can seek for lost wages. Self-employed individuals can write off certain business expenses that regular employees cannot, thus significantly lowering net income. For example, if you make $100,000 in a year but only claim $70,000 after deducting business-related expenses, the amount you receive in monthly wage loss benefits may be lower than you believe you deserve. Lost wages are just that — lost wages. Lost business opportunities and lost benefits are not included.

Do not commit fraud. On your claim, be honest about what you earned and how long you were unable to perform your job. It is best to submit all documentation and evidence of lost wages and missed work promptly so you can start the 30-day clock. That is, by providing all reasonable proof that you, as the injured accident victim, are eligible for wage loss benefits and in what amount, the insurance company now has 30 days to make the payment without it being subject to interest.

If you are denied benefits for your personal injury claim for any reason, seek a Michigan attorney’s advice to determine your options going forward, including filing a personal injury lawsuit to prevent further financial hardship.

Who Pays for My No-Fault Lost Wage Claim?

As a self-employed person, you may wonder who will pay for your no-fault lost wage claim. The answer depends on the type of motorist coverage insurance you have.

Your insurance company will pay if you have a no-fault insurance policy where you are the named insured. If you do not have this, then your spouse’s insurance or a resident relative’s insurance will cover the cost. A resident relative is someone who resides in the same home as you and is related to you by blood or marriage.

However, if none of those apply to you, you must file under the Michigan Assigned Claims Plan (MACP), and the state will assign a car insurance company to pay for your claim. The MACP provides car accident victims without insurance with no-fault personal injury protection.

Following filing a MACP claim, the state agency or assigned insurer will alert you in writing within about 60 days as to what documentation is required to demonstrate proof of loss reasonably. An insurance adjuster can deem you ineligible and deny benefits if you do not provide adequate proof. Seek a free case evaluation with a dedicated Michigan personal injury lawyer to increase your chances of obtaining lost wages from car accident injuries.

Recover From Your Loss With Our Help

Self-employment brings with it many advantages. Yet, when you sustain an injury due to a car accident, you may be unable to work, harming your ability to make a living. In Michigan, you are eligible for lost wages and will need to file an insurance claim. However, these claims can be challenging for self-employed individuals. You must submit enough evidence and not back down to insurance companies seeking to limit or deny the amount you are entitled to receive.

Let the experienced and knowledgeable Michigan personal injury attorneys of Matz Injury Law help. Call 1-866-22Not33 today to schedule an initial free consultation, or contact our law office through our convenient online contact form. We want to help you recover from your loss and will diligently seek the wage loss benefits you deserve.