1. W-2 Form: the best Proof of Income Document
A W-2 form is issued by the government to verify an individual’s income. This form is especially useful for tax purposes and can also serve as strong proof of income for landlords, as it provides a detailed breakdown of an individual’s income structure.
However, many renters may not have their W-2 form readily available, like other income verification documents. Additionally, the W-2 reflects only the income from the previous calendar year, rather than the most current earnings.
2. Pay Stubs
A pay stub is a simple way to verify a person’s income. Most people working in corporate jobs receive pay stubs with each payment, which display the amount they earn for a given pay period.
Pay stubs do not differentiate between hourly workers and commission-based employees. If you choose to request pay stubs, ask for a few examples.
Request pay stubs from their most recent payment to ensure that the individual is still in the position reflected on those documents.
3. Bank Statements
Bank statements serve as proof of an individual’s interactions with their bank. They display details such as withdrawals, deposits, and the current balance. This information helps assess the applicant’s reliability and whether they can afford the location.
This type of documentation is particularly useful for those who do not receive traditional forms of payment. Bank statements can reveal whether the applicant can cover rent consistently or if their income fluctuates.
4. Tax Returns
Tax returns provide insight into both unearned income and a history of earnings. They contain detailed information about the earner, which can be useful for landlords when evaluating potential tenants for their properties.
However, tax returns only reflect income from the previous calendar year. If you’re interested in understanding a person’s current income, tax returns are not the best resource. Instead, look for more recent proof of income.
5. 1099 Form
A 1099 form records miscellaneous income, typically from side hustles and other business ventures. Freelancers commonly work with 1099 forms. Individuals who are self-employed or own their own businesses also utilize a 1099 form.
6. Letter From Employer:
If you must communicate with someone, a letter from an employer (“employment verification letters”) can act as proof of income. In addition to verifying income, this letter can also include a recommendation for the applicant, reflecting the employer’s opinion of their work.
7. Disability Insurance
Disability insurance serves as strong proof of income for applicants who receive some form of compensation. They can present a letter documenting their income to show the amount they receive each month.
If you decide to utilize disability insurance, be sure to request proof of income for the period after workers’ compensation expires. Be aware of when the insurance coverage will end, so you can determine how long the employee will be protected with rent payments.
Since incomes from these sources can vary, be sure to request the most recent 1099 form. Freelancers, in particular, may have multiple 1099 forms in a year, as they typically pay taxes on a quarterly basis rather than annually.
8. Court-Ordered Payments
Some applicants may be receiving court-ordered payments, such as alimony or child support. If this applies, please inform them that these payments serve as valid proof of income for securing an apartment.
Court-ordered payments typically come directly from the court and are generally consistent and reliable. However, it’s essential to note that there may be periods when these payments are delayed, resulting in a temporary shortfall of income for that month.
9. Pension Distribution Statement and Social Security Benefits
A pension distribution statement, commonly referred to as a 1099-R, outlines retirement benefits, including annuities and pensions. This statement serves as a reliable proof of consistent income.
It can be challenging to differentiate between monthly and annual payments on a pension distribution statement. However, it remains an excellent way to demonstrate that an applicant has a steady income.
Be cautious, as letters of income can be easily forged. If you suspect this might be the case, ask for the employer’s contact number. This way, you can call to verify the information and confirm that the letter is authentic. Additionally, request secondary proof of income for further validation.
10. Unemployment Statement
Unemployment documentation serves as a method to verify income for applicants who are currently unemployed. They can provide details about any benefits or unemployment payments they are receiving.
Once the applicant secures a job, you may request additional verification. Remember that unemployment benefits are temporary, so consider this limitation when accepting them as proof of income.
What Happens After Receiving Proof of Income Documents?
After obtaining proof of income, follow up on it. If the applicant provides a letter from their employer, be sure to call the employer to verify their employment status. Ask whether the individual still works there and if they have been recently terminated.
Proof of income is crucial for assessing trustworthiness, but following up is equally important. Additionally, conducting a background check will help fill in the remaining gaps you need to make an informed decision about the applicant.
