A steady income is the best indication that an applicant can make their payments on time, every time. Let’s talk about ten of the best documents to help learn more about their current income situation. Try to ask for at least two of these for the most accurate results. More is better for a well-rounded view of their income.
1. W-2 Form
A W-2 form comes from the government and is used to verify income. This income verification comes in handy for tax purposes, but it can also provide excellent income proof for landlords. It’s a detailed way to see how an individual’s payments work.
Unfortunately, many renters don’t have their W-2 form on hand as easily as other proof of income documents. It also only talks about the previous calendar year’s income rather than your most recent stream of income.
2. Pay Stubs
A pay stub is the easiest way to get information about a person’s income. Most people who work in corporate jobs will get these when they are paid, displaying the amount they receive at the end of a payment period.
This form of proof does not distinguish hourly workers from commission-based employees. If you decide to use pay stubs, ask for a couple. You should also ensure that you ask for pay stubs from their most recent payment. This action will help ensure they are still in the position the pay stubs show.
3. Bank Statements
Bank statements are what they sound like - proof of an individual’s interactions with the bank. It should display withdrawals, deposits, and the current bank balance. This information will prove reliability and prove if they can afford the location.
This form of proof works well for those who don’t receive payment traditionally. You can see if the applicant can cover rent or if their income is inconsistent.
4. Tax Returns
Tax returns reveal both unearned income and a history of earnings. It’s comprehensive in the details it provides about the earner, which is helpful for any landlord trying to figure out what’s best for their building.
Unfortunately, tax returns only cover the previous calendar year. If you want to learn more about their current income, tax returns are not the way to go. Look for a more recent form of proof of income.
5. 1099 Form
A 1099 form is documentation of miscellaneous income, often from side hustles and other business ventures. Most often, freelancers work with 1099 forms. Someone who is self-employed or owns their business will also use a 1099 form.
6. Letter from Employer
If you want to talk to a person, a letter from an employer can serve as proof of income. Along with proof of income, a letter can also hold a recommendation for the applicant based on what the employer thinks of them.
7. Disability Insurance
Disability insurance is an excellent proof of income if the applicant earns some compensation. They can display the letter with the income proof to show the amount they get per month.
If you choose to use disability insurance, ask for proof of the income they will receive when the worker’s compensation expires. You should also know when the insurance will expire to see how long the employee is covered for with rent.
Since incomes with these forms can be scattered, ensure you ask for the most recent 1099 form. Some workers may have multiple a year since freelancers tend to pay taxes quarterly rather than annually.
8. Court-Ordered Payments
Some applicants could be receiving court-ordered payments. These include financial help such as alimony or child support. If this is the case, inform them that these work as accurate proof of income for an apartment.
Court-ordered payments should come straight from the court. Most of the time, these payments are consistent and reliable. However, be aware that court-ordered payments can be stalled for a period, resulting in a lack of income for that month.
9. Pension Distribution Statement
A pension distribution statement, also known as a 1099-R, displays retirement benefits. It also displays annuities and pensions that provide reliable proof of income that comes consistently.
It can be tricky to separate monthly payments on a pension distribution statement from annual payments. Still, a pension distribution statement is an excellent way to prove that the applicant has a consistent income.
Unfortunately, a letter can be faked easily. If you think this could be the case, ask for their employer’s number. That way you can call them to verify the information and ensure the letter is a genuine recommendation. Ask for secondary proof of income as well.
10. Unemployment Statement
Unemployment documentation is a way you can verify income if the applicant doesn’t have a job at the moment. They can provide information about any benefits or forms of unemployment payment they have.
Once they get a job, you might ask for further verification. Unemployment benefits only last for so long, so keep this in mind with this proof of income.
Once you have proof of income, ensure you follow up with it. If the individual provides a letter from an employer, call the employer. Do they still work there? Were they recently fired?
Proof of income is critical to determine trustworthiness but following through is just as vital. A background check will fill in the other missing pieces you need to decide on an applicant.