Landlords are one of the few groups of people who are able to ask how much money someone makes without committing a social faux pas. And rightly so as landlords need to verify that a new renter will actually be able to afford the rent they’re charging each month. A landlord will likely ask for several income verification documents on the rental application, and before handing over the keys to that two-bedroom, south-facing apartment with exposed brick, they will also want to verify the provided proof of income documents to protect against any fake or fraudulent documents.
What is Proof of Income?
Proof of income is used by landlords in order to determine a tenant’s ability to pay rent. By evaluating a tenant’s monthly income, job status, past payment history, and debt status, landlords will be able to determine if the candidate is a safe choice to fill their rental. There are many income verification documents that can be used to show verifiable income which we’ve outlined below.
8 Ways to Verify Proof of Income
1. Income Statement (W-2)
A W-2 is an IRS tax form that must be completed by employers for each of their employees. Employers report total annual wages paid on this form. This is a valuable way to get a full picture of a tenant’s overall income status as it depicts a full year’s worth of salary.
2. Miscellaneous Income (1099-MISC)
A 1099-MISC is used to report various types of income someone may receive throughout the year for non-salary positions. Independent contractors and self-employed individuals use this form. A 1099 can also be a useful way to show proof of income for anyone that earns money from an asset or royalties.
3. Bank Statements
A bank statement can be used to show a history of steady deposits, or to shed light on any dangerous spending habits. Many tenants may find this method of information verification a bit intrusive. After all, it is thought you can really tell a lot about a person based on their spending habits. However, there are various other ways to verify income for those who feel a bank statement is too personal.
4. Pay Stubs
A pay stub, also known as paycheck or pay slip, is received by employees each pay period and shows net take home pay. Pay stubs are an easy way for renters to show how much they received in recent paychecks; however, they are also easy for renters to forge. Look for perfectly rounded numbers, alignment issues, and the use of O’s instead of 0’s when attempting to spot a fake pay stub.
5. Employer Letters
A letter of reference from an employer is a valid method for someone to show a landlord that they have a stable income and also that this income will remain steady over the lease term. Employees can request a letter from their employers directly. To streamline the process, an individual may consider downloading a template and bringing it to the employer. This can be done by using our printable proof of income letter for employers to fill out below.
6. Federal Income Tax Return (IRS 1040)
The IRS Form 1040 has a section to report annual income. This document gives an accurate picture of a tenant’s annual income as it shows all sources of income, including income from assets and non-salaried positions. A tenant can request a photocopy of the form or a computer transcript of the information through the IRS.
7. Social Security Benefits Statement
A Benefit Verification Letter is an official letter from the Social Security Administration (SSA). This letter details monthly benefits income and is a great way for individuals who receive retirement, disability, or Supplemental Security Income (SSI) benefits to prove income.
8. Workers’ Compensation Letter
Workers’ compensation provides lost wages and medical benefits to employees who are injured on the job. An individual receiving workers’ compensation can provide a letter detailing lost wage compensation as verifiable income. It is important to note that while this letter can show steady income for a short period of time, these benefits tend to eventually end.
Do Tenants Fake Income Verification for Apartments?
Because it is easier than ever to create fake documents online, some tenants unfortunately create fake income verification documents. Tenants can create fake pay stubs in about one minute using various free or inexpensive online tools. It is important for a landlord to do their due diligence when reviewing income verification documents in order to recognize fake pay stubs.
Verifiable Income Recommendations for Landlords
Obviously there is no need for landlords to require eight different income verification documents. Depending on the monthly rent, landlords should ask for two to three proof of income documents. For individuals that are currently working, it makes the most sense to ask to see several pay stubs or a W-2 and a tax return. For elderly renters, a landlord will need to verify a Social Security Benefits Statement, and for injured workers a Workers Compensation Letter. For expensive rentals, landlords may also want to consider asking for a bank statement.
Proof of Income Letter for Apartment [Printable]
Here is a handy template that landlords can download and give to their tenants to have employers fill out. You can include this form along with the rest of the lease paperwork for your new tenants to sign.
It is crucial for landlords to not only ask for proof of income documents from renters but to also look out for fake income verification documents. TurboTenant offers a number of tools to make this process easier for both landlords and renters. Landlords can find a standard rental application and screen tenants right through TurboTenant.