How to Spot a Fake W2

Verifying income is vital in assessing a potential tenant’s ability to pay rent.  However, some applicants may submit fake or altered W2 forms when it’s time to submit proof of income.

 Identifying fake W2s is essential to protecting your rental unit and ensuring a dependable, trustworthy tenant pool. In fact, handling a suspected fake W2 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 detect common signs of fraudulent W2s and take the right steps when this does occur. 

Why Applicants Fake W2s

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 W2s 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. In addition, if eviction is necessary, it can be time-consuming and expensive, involving court fees, legal representation, and lost rental income during the process. 

Common Signs of a Fake W2

Formatting and Layout Errors. Be on the lookout for mismatched font sizes, types, or spacing. Genuine W2s usually use standardized, consistent fonts. Also, blurry text, low-resolution images or unusual watermarks indicate the document may not be 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 W2s tend to have fabricated or incorrect numbers. And be sure to verify that the employer’s address exists and mirrors publicly available data. 

Questionable Employer Information. Some scammers craft fraudulent W2s 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 W2s 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 W2 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 urge people to submit a transcript of their W2 straight 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 W2

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 realize that misunderstandings can happen, and clear communication is crucial.

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 W2 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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