How to Spot a Fake W-2

Verifying income is vital in assessing a potential tenant’s ability to pay rent. However, some applicants may submit fake or altered W-2 forms when it’s time to submit proof of income.

 Identifying fake W-2s is essential to protecting your rental unit and ensuring a dependable, trustworthy tenant pool. In fact, handling a suspected fake W-2 professionally can safeguard your property management business from financial loss and legal risks while upholding ethical standards in your screening process.

This blog post will help you identify common signs of fraudulent W-2s and take the necessary steps when this occurs. 

Quick Insights

• Applicants use fake W-2s to exaggerate income or fabricate employment entirely.
• Formatting issues, such as mismatched fonts, blurry text, or missing elements, are common signs of a fake.
• Inaccurate or inconsistent information, such as incorrect employer details or typos, should raise red flags.
• Round income numbers and incorrect tax deduction amounts are warning signs.
• W-2s missing company logos, signatures, or official formatting may have been created with online generators.
• Cross-checking the EIN, employer address, and income against other documents can help verify legitimacy.
• Always contact the listed employer directly to confirm employment status.
• If fraud is confirmed, document your findings and follow consistent procedures to stay compliant.

Why Applicants Fake W-2s

Some people engineer income documents to appear as if they are more financially stable or to meet income-to-rent ratio requirements. Other applicants may resort to fabricated documents if they simply don’t generate the income to afford the rental. Knowing this motivation emphasizes the importance of a comprehensive screening process.

Fake W-2s can be troublesome for property managers. For example, if a tenant can’t afford the rent due to misrepresented income, some landlords could face rent arrears, forcing them to use reserves or take legal action. Additionally, if eviction is necessary, it can be a time-consuming and expensive process, involving court fees, legal representation, and lost rental income during the proceedings. 

Common Signs of a Fake W-2

Formatting and Layout Errors. Be on the lookout for mismatched font sizes, types, or spacing. Genuine W-2s usually use standardized, consistent fonts. Additionally, blurry text, low-resolution images, or unusual watermarks may indicate that the document is not legitimate.

Inaccurate or Mismatched Information. Read the fine print – even minor typos in the employer’s name should stand out as questionable. Always cross-check the EIN against the IRS database – fake W-2s tend to have fabricated or incorrect numbers. Also, ensure that the employer’s address is accurate and matches publicly available data. 

Questionable Employer Information. Some scammers craft fraudulent W-2s using online generators. These tend to have generic layouts that don’t resemble the refinement of a genuine document. Consider it a red flag if there are missing company logos, signatures, or watermarks that are often displayed on true W-2s issued by a legitimate employer. 

Anomalies in Income Figures. Be wary of perfectly round income figures – like $50,000. These are incredibly rare on genuine documents. Remember to compare tax deductions, Social Security, and Medicare amounts to standard percentages – fake documents might not follow these standards.

Verification Steps for Property Managers

It’s important to ask for supporting documentation during the tenant screening process. Request supporting documentation like:

• An applicant’s most recent pay stubs
• Bank statements that confirm regular deposits from the tenant’s employer
• An authentic employment verification letter

Here are some additional steps to include in your process:

Verify directly with the prospect’s employer. Contact the employer listed on the W-2 to verify the potential renter’s position, income, and employment dates.  

Cross-check IRS data. While direct access to a potential tenant’s tax filings is limited, you can encourage individuals to submit a transcript of their W-2 directly from the IRS.

Use verification services. Third-party tenant screening services and fraud detection tools include income and employment verification capabilities. These services use the latest tools to help authenticate documents and identify inconsistencies.

What to Do if You Suspect a Fake W-2

For starters, always double-check your discoveries to confirm there’s a real issue with the document.

Give the potential renter a chance to explain or arrange for additional proof of income. If applicable, make sure the process of questioning documentation is consistent and compliant with fair housing laws. The key is to recognize that misunderstandings can occur, and clear communication is essential.

It’s important to evaluate the applicant’s response carefully during this stage. An honest error can be resolved quickly, but a vague or shifty response could confirm your suspicions.

If you can 100% verify that fraud took place, reject the application based on the inability to verify income. Always keep documentation of your findings, should disputes arise. Depending on the severity, some landlords might decide to report the situation to authorities.

Stay One Step Ahead

Detecting a fake document or W-2 requires attention to detail, vigilance, and an organized approach to income verification.

By understanding the common signs and red flags of fraud and implementing a robust screening process, you can safeguard your rental property investments and ensure you choose trustworthy renters.

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