Detailed Answer

Short answer: As a self-employed person in Arizona you can recover lost earnings caused by an accident, but you must document the loss carefully. Arizona law allows recovery for economic damages such as lost earnings as part of a personal-injury claim (see Arizona Revised Statutes, Title 12: Civil Procedure: https://www.azleg.gov/arstitle/?title=12). The claim must be proven by a preponderance of the evidence — i.e., more likely than not.

What counts as lost wages for the self-employed?

Lost wages for a self-employed person generally include income you would have earned but for the injury. That covers:

• Gross business revenue you lost because you could not work;
• Net profit (reduced revenue minus business expenses) when profit is the meaningful measure of your personal earnings;
• Lost future earnings or diminished earning capacity if the injury reduces your ability to earn over time.

Who pays and how the claim is made

You usually pursue lost wages in one of these ways: directly with the at-fault party’s insurance company, through a lawsuit against the at-fault party, or (if the accident occurred on the job) through workers’ compensation. The insurer or court will expect solid documentation showing both the fact of the loss and the amount.

Key categories of admissible proof

Mix objective records and corroborating testimony. Common, persuasive items include:

• Tax returns (individual Form 1040 and business Schedule C, partnership/LLC returns if applicable) for prior years to show baseline earnings.
• Profit & loss (P&L) statements and general ledgers showing income and ordinary expenses both before and after the accident.
• Bank and merchant-account statements showing deposits, payments, client receipts, canceled checks, and transfers.
• Invoices, contracts, purchase orders, and client communications showing scheduled work you missed.
• Estimates, receipts, or statements showing jobs cancelled or postponed because of your injury.
• QuickBooks or other accounting software reports (exported to PDF) summarizing monthly/annual receipts and expenses.
• Tax filings that demonstrate self-employment tax payments and net income; corrected or amended returns if you had atypical income years.
• Documentation of efforts to mitigate — e.g., part-time work, subcontracting, or hiring temporary help.
• Expert reports (accountant or vocational economist) that translate business records into a credible lost-earnings calculation, and, when needed, explain projected future losses and discounting to present value.
• Medical records showing how the injury limited your ability to work and for what period.
• Witness statements from clients, subcontractors, or colleagues corroborating canceled jobs or reduced capacity.

Practical calculation methods

Common approaches to calculate lost earnings:

• Historical-average method: Use a multi-year average of gross receipts or net profit (commonly 2–5 years) to determine your typical income, then prorate that average for the period you could not work.
• Projective method: For seasonal or growing businesses, use trend analysis (year-over-year growth) to estimate what you would have earned absent the injury.
• Job-by-job method: Tally specific contracts, invoices, or proposals that were cancelled because of the injury.
• Future-earning-capacity analysis: When injuries permanently reduce earning ability, an economist or vocational expert may calculate lifetime lost earnings and discount to present value.

How Arizona courts view business records and credibility

Arizona courts, like most jurisdictions, prefer contemporaneous records over later reconstructions. If your records are irregular, you should:

• Produce tax returns and bank statements that back up claimed income;
• Explain legitimate fluctuations in income (seasonality, new investments, one-time contracts) with documentation;
• Be consistent in testimony and records — inconsistencies reduce credibility and damage the claim.

Using experts

Accountants and vocational/economic experts are common in self-employed lost-wage claims. They convert messy business records into a reliable lost-income figure and may provide a written report and courtroom testimony. If you use an expert, expect the defendant or insurer to hire a rebuttal expert.

Practical steps to prepare a strong claim

1. Stop the gap: begin contemporaneous documentation immediately — log missed work, emails from clients, cancelled projects, and dates you couldn’t work.
2. Save originals: preserve original contracts, invoices, calendars, and bank/merchant statements.
3. Gather tax returns for at least three prior years (longer if your income varies or you claim future losses).
4. Ask an accountant to prepare year-to-date profit & loss statements and to explain net income vs. gross receipts.
5. Document medical care that supports the time you were unable to work (doctor’s notes, restrictions, disability forms).
6. Obtain written statements from clients or subcontractors who confirm canceled or delayed work.
7. Consider an expert (accountant or vocational economist) early: they can advise what records will be persuasive and prepare a report if needed.

Insurance adjusters, settlement, and litigation tips

Adjusters expect documentation. Present a clear, concise packet: summary of loss, supporting records, and an expert calculation if available. If you cannot persuade the insurer, you may file suit. Arizona civil litigation follows the civil procedure rules and disclosure obligations — expect discovery requests for financial records and depositions.

Arizona-specific procedural note

Arizona Revised Statutes govern civil claims and damages generally (see Arizona Revised Statutes, Title 12: https://www.azleg.gov/arstitle/?title=12). Practice and evidence in Arizona follow state procedural and evidence rules administered by the Arizona courts: see Arizona Supreme Court rules and the Arizona Judicial Branch (https://www.azcourts.gov/). If you plan to litigate, consult those resources or an Arizona attorney for deadlines, discovery rules, and local courtroom practice.

Disclaimer: This article explains general principles and practical steps under Arizona law and is for educational purposes only. It is not legal advice. Consult a licensed Arizona attorney to get advice about your specific situation.

Helpful Hints

• Start documenting the moment you become unable to work: notes showing dates, hours not worked, and communications with clients are crucial.
• Keep at least three years of tax returns and business records; consistent historical data strengthens your claim.
• Separate personal and business accounts — clean records reduce disputes over what portion of revenue is personal earnings.
• Use an accountant to create P&L statements and to explain the difference between gross receipts and taxable net income.
• Collect client emails or letters confirming canceled jobs or lost business because they make the connection between your injury and lost income clear.
• If you receive interim payments (insurance, emergency funds), track them; they can affect settlement negotiations and the net loss calculation.
• Be prepared for discovery: insurers or defendants will request bank records, tax returns, and sometimes social media posts — deny nothing and be truthful.
• Consider hiring an attorney early if your business loss is large, your records are complex, or liability is disputed — an attorney can coordinate experts and preserve evidence.
• Document mitigation efforts: courts expect injured people to try to reduce their losses (e.g., by subcontracting work or accepting modified duties).
• When negotiating, stress clarity: a concise summary with a simple arithmetic explanation of your lost-income claim often works better than a long, disorganized packet.