Note: The following should not be construed as legal and/or accounting advice. If you are in an accident and need to calculate a loss, please contact an attorney and/or an accountant for legal/accounting advice. Remember - I do this everyday, but I still have a lot of people checking my stuff before it goes out.
So, another thing the firm I work for does is help to calculate losses when people have been in auto accidents. I've been involved in a few cases now, so I'm beginning to get a handle on what we look for in these cases. Usually we work for the defendent, which will color the comments I make on calculating this type of loss, because, while we are independent, a plaintiff's accountant will usually not take certain things into consideration.
Sometimes, after being in an accident, the plaintiff will have had to take time off from work, or may not even be able to do the same job anymore afterwards, due to the injury. As the investigator, it is important to verify that the injury actually kept them from working, and not that they just put a neck brace on in the courtroom.
So, the kinds of records that would be looked at would be credit card statements, bank statements, and even hobby-specific things, such as a GHIN card if someone is a known golfer. If you hurt your back, and can't work, but can golf every weekend, your case is suddenly not so air-tight. Credit card statements will show what kinds of purchases were made, i.e., new golf clubs, membership dues, ice skates, whatever.
If you are injured, be sure to keep track of what you're buying that might be misconstrued. If you bought your niece some sporting equipment, keep the receipt, especially if it can show that it was not for you. i.e., it denotes it's girl's shoes and you're a guy. These things could very well come up in a deposition, and you'd be best served having answers ready before that happens.
Other records to be looked at would be the tax returns, definitely. Tax returns are the number one most reliable documents, because if they're not reliable, you're going away for tax fraud. So, we ask for those, and look to see how much you were making before the accident, and how much you made after the accident. It's usually less after the accident, but that does not mean there's neccessarily a loss of income.
Actually, you could never work again, and still not have a loss of income. If you could be working a different job to make up for the income you're losing, then you are not going to be owed anything. If you ARE working to mitigate your loss, then however much you make comes right off the top - but it would've anyway, regardless, so it's good to have that money.
If you own your own business, and you are a vital part to that business - that's where the big cases come from. If you are an electrician, and you are the only employee, and now you're injured and can't work that job anymore - chances are you can do something else, but not for nearly as much money. However, if you own a business of 4 or 5 electricians, and then get injured, chances are you can hire more electricians and have more of a management role, and still make the same money. I could definitely make the argument that you could manage your employees better now that you aren't making calls yourself, and therefore, can make as much or more money.
Tax returns will have all that information in them, because it shows business income and wages, and anything else you make.
The calculation itself is really simple. Basically, it's the former earnings capacity less the current earnings capacity, multiplied by how long you are injured for, or the expected work-life.
Questions and comments are welcome, but remember - I am inexperienced and don't know everything, so I can't give any real advice.