How to Get Better Proof of Income

You wouldn’t buy a used car without at least a test drive. Similarly, getting proof of income is helpful when selecting potential tenants. Without this due diligence, you may risk the wheels falling off on your rental business.

Given that your success depends on tenants paying the rent on time, in full, and every month, it’s no wonder that non-payment is the top concern of independent landlords. And, it’s a justified fear. According to an article from CNBC, about 15% of Americans were behind on rent in 2022.

While there may be many valid reasons for tenant to get a little behind due to unexpected circumstances, chronic late or completely missing payments can leave you holding the bag.

Before signing a lease with any tenant, it’s incredibly important to help protect yourself with thorough tenant screening with a reputable company like SmartMove®––and that includes getting financial information.

This article covers what you need to know about getting proof of income including why it’s important, what to ask for in different employment situations, and common scams to look out for.

Heres what to expect:

What Should Qualify as Proof of Income for Tenants

There are several ways you can help verify a potential tenant’s income. What you might ask for or receive could depend on the individual's employment situation. Below, you’ll find common documentation requested for traditional employees, self-employed people, and unemployed or retired people.

Proof of Income For People Employed by a Company

If a rental applicant is a traditional employee of a company or business, here are some examples of proof of income you might receive from them:

1. Pay stub. Ask for pay dated stubs from at least the last three months.
2. W2 or 1040 tax form. A W2 or 1040 should provide a snapshot of the rental applicant’s income from the previous tax year.
3. Employer letter. This is usually a form letter provided by the employer outlining details like job title, salary, employment start date, and, in the case of shorter-term jobs, expected end date.

It is okay to be wary of documents provided by the tenant directly. Check out the section on common rental scams below for more information on what to watch out for.

Proof of Income For Self-Employed People

For self-employed people like independent contractors or gig workers, proof of income may look a little different from traditional workers. Their proof of income may include:

1. Bank statements. You can request dated bank statements for at least the last three months. However, some applicants may see this practice as invasive, as it also divulges personal purchase information.
2. Balance statements. Instead, you may want to ask for balance statements for the last several months. These letters are issued by banks and include what a person’s balance was on a specific date.
3. Form 1099. For independent contractors, this annual tax form shows income made through gig work and short-term jobs.
4. Tax returns. Looking at past tax returns can provide a better understanding of a person’s income for the year.
5. Income Insights. Specific to SmartMove, Income Insights helps verify that a rental applicant earns what they put on the application form.

Proof of Income for Unemployed or Retired People

If someone is retired (at any age), unemployed, or unable to work due to a disability, you may still collect documentation and verify that they have sufficient funds to cover your monthly rent.

Here are some common types of financial documentation for unemployed or retired people:

1. Social security benefits statement. This can help you see what a person should receive from the government every month.
2. Workers compensation statement. If someone was injured at work, workers comp statements can help you understand their financial benefit.
3. Annuity statement. Annuities often help replace a paycheck in retirement and can help you verify regular income.
4. Bank statements. These can help you better understand regular balances and deposits.
5. IRA/401(k)/pension distribution statements. You can review statements for IRAs, 401(k), and, in the case of a pension, a Form 1099-R.
6. Unemployment statement. This statement is generated by the government and provides information about unemployment benefits.

Common Income Proof Scams and How to Protect Yourself

Unfortunately, not every rental tenant is going to be as golden as they appear on paper. Providing fake documents is one of the top five rental scams encountered by landlords. In fact, according to a recent article from Curbed, rental fraud has doubled in the last few years––from 6% to 12% of rental applicants.

While some fakes might be comically obvious (such as an employer letter that spells the company’s name incorrectly), others are so convincing it can be almost impossible to tell. According to the U.S. Federal Trade Commission, there are even websites that sell extremely convincing fakes documents for this purpose.

Below, you’ll find a non-exhaustive list of signs your rental applicant’s documents might be fake––and how to get more reliable proof of income.

How to Better Spot Fake or Doctored Documents

In rental applications, there are many documents desperate tenants might edit––or outright fake, including:

• Paystubs
• Letters from an employer
• Credit reports
• Tax and other government forms
• Amounts, dates, names, or small details on otherwise valid documents

The truth is that you can’t always tell if tenant-supplied documents are fake. This is why it’s critical to get additional data through third party source. However, when you are looking through tenant-supplied documents, here’s how to help avoid getting scammed:

Take a closer look.

Some of the most obvious signs of a forgery are small details that can give the whole thing away. According to property management firm Realty Masters, here are a few potential red flags on paystubs and similar:

• Conflicting information. The employee name, amounts, or company on is not spelled correctly, doesn’t match what’s on the rental application, or contradicts itself.
• Perfectly even numbers. Salaries that end in perfect, tidy numbers. Many post-tax income statements end with decimals
  • Example: $43,765.38 vs. $45,000)
• Uneven text. If certain letters or numbers are not perfectly aligned, if they appear higher, lower, or in a different font than the others, it could be a sign someone doctored a document after it was issued.
• The math doesn’t add up. For paystubs and other documents with tax withholding, the tax amounts withheld seemed off for the salary. For example, if someone’s annual salary is $100,000 and their withheld tax is only $3,000, that could be a sign that a lower salary was replaced with a higher salary.
• The letter ‘O’. Numbers have the letter ‘O’ where ‘0’ should be.

Verify information online

If you have a paystub or employment letter, you can start your verification process online. Check that that information like the business name, address, location, and phone number 1) actually exist, and 2) are accurate for the company.

This process can be time consuming, but so is eviction.

Contact employer or document provider

Employers issue proof of employment letters to their workers all the time and it is very common (and accepted) for landlords to verify this information.

It’s also possible for potential fraudsters to use a real employment letter, but fudge small details like inflating their salary or padding the expected duration of a lucrative gig.

While talking with employers, it’s important to verify that all details match what the applicant provided, including:

• Employer's name
• Employees name
• Title
• Type of job (e.g. full time, part time, seasonal, etc)
• And work end dates
• Salary

Save time and run your own check

While all of these methods can help you discover forged documents, one of the best ways to protect yourself from potential fraud is not rely solely on tenant-supplied documentation. Run your own reports and get real data to back up your gut.

Verify your rental applicants self-supplied information with a tenant background check that includes important financial checks like:

• Tenant credit check. Take a dive on your rental applicant’s financial history to help confirm that the financial picture they present makes sense.
• Income Insights. Help verify your tenant earns what they put on the rental application.
• ResidentScore®. Designed specifically for landlords, this proprietary tenant rating helps predict evictions 15% better than a traditional credit score.

Help Protect Your Property Business with SmartMove

Like a potential tenant, a car might look amazing on the outside––but have a rusty engine and squirrel’s nest inside. To protect yourself against the worst, it’s essential to pop the hood and take a good, long look so you know exactly what you’re getting. For rental applicants, that means conducting ultra-fast, affordable online tenant screening with SmartMove.

Potential tenants can easily fudge the documents they give you. Help verify proof of income with third party data. A credit check helps reveal your rental applicant’s financial track record, meanwhile Income Insights helps confirm they actually make what they claim on the application. Included in every SmartMove screening package, a ResidentScore helps prevent evictions 15% better than a traditional credit score.

Unfortunately, getting financial proof isn’t the only thing you have to worry about as a landlord. It’s your responsibility to help protect your other tenants, neighbors, and property. Tenant criminal record checks zip through millions of criminal records to see if there’s a potential match for your applicant. What’s more, previous eviction checks helps find eviction-related court proceedings which may be connected to your tenant.

Specifically designed for independent landlords with only occasional screening needs, SmartMove provides on demand reports in just minutes. All reports are backed by TransUnion, a reputable credit agency with four decades of data expertise. There are no extra costs or hidden fees. Simply create a free account and start screening immediately.

Don’t leave your property business stranded by the side of the road. Motor towards brighter futures with extra-convenient, flexible tenant screening through SmartMove.

SmartMove
Great Reports. Great Convenience. Great Tenants.