Have you ever questioned whether a prospective tenant’s pay stub is real? Misrepresentation of income is one of the most common types of application fraud in Canada. Moreover, rental fraud is one of the costliest expenses for landlords.
The issue is that editing apps are causing fraudulent documents to appear legitimate on a large scale. Landlords often struggle to assess potential issues with tenants’ pay stubs. There are a few signs to look out for.
What is a Legitimate Pay Stub?
The information included on a legitimate pay stub must accurately reflect the employee’s wages, taxes, deductions, employer details, and pay schedule. In many cases, pay stubs are generated using payroll software. However, advances in technology have enabled many people to create convincing fake documents.
Some online platforms allow users to make a pay stub within minutes. It is important that landlords know what authentic payroll records should include and how to identify inconsistencies. Here are the red flags they must be able to spot.
Employer Details Not Matching
One of the easiest red flags to spot is inconsistent employer information. If there is an inconsistency in the employer’s name and address, for example, this is a major red flag. The employer’s information in the pay stub must match public records for that business. This includes:
- The business name
- The address and website of the business
- Â Â Contact information
If the business cannot be found online, the contact information appears incomplete, or the address on the pay stub does not belong to the business, you need to investigate further.
Incorrect Year-to-Date Totals
Year-to-date numbers are supposed to be a cumulative total (earnings and deductions) that have accrued to date for the calendar year. The reason phony pay stubs often have calculation errors is that those who create them are more concerned with how they look than with how they calculate mathematically.
For example, if an applicant receives the same salary every pay period, the year-to-date earnings should closely correspond with the number of paychecks received so far that year.
Unusual Tax Rates for the Location
Payroll taxes tend to have consistent patterns depending on both income and state guidelines. Individual tax situations may differ, but if you see withholding amounts that are extremely low or high, it could suggest that something is wrong.
If a pay stub shows no standard payroll taxes or withholding percentages that do not match the reported wages, it is important to investigate the issue. Landlords do not need to be tax experts to determine when the numbers on the pay stub look unusual.
Varying Payment Frequencies
Almost every employer has a regular payroll frequency, which may be weekly, biweekly, semimonthly, or monthly. A legitimate pay stub will usually reflect this regularity.
If an employer’s payday appears as though it has changed frequently, or if the pay periods overlap, the pay stub is likely not from an employer that uses a legitimate payroll system. The best way to determine whether an established payroll pattern exists is to review several consecutive pay stubs.
Common Formatting Issues and Fonts
Commonly, fraudulent pay stubs may have subtle design flaws that can be missed at first glance. They may include misaligned text, inconsistent spacing, or blurry logos.
These are all indicators that a document has been edited. Enlarging a digital copy can help identify these flaws as well.
Missing Deductions or Payroll Info
Most employees have deductions listed on their pay stubs, including taxes, retirement contributions, insurance premiums, and other withholding. A pay stub reporting earnings with little or no information on deductions indicates a possibility of fraud.
Missing employee ID numbers, payroll reference numbers, and tax information are all signs of fraudulently generated payrolls.
Extra Verification Procedures
Although a pay stub may appear accurate, it should not be the only method for determining an applicant’s financial qualifications. If you wish to gain a true overall view of the applicant’s income, you may want to request current bank statements, employment verification letters, and multiple consecutive pay stubs.
It is also important to verify the applicant’s employment with sources not included in the rental application. Consider using independently-obtained contact information. These additional methods can greatly lower the chance of approving an applicant based on false or inaccurate information.
Trust, but Verify
Pay stubs are an important screening tool. However, each one should be reviewed carefully. The signs listed above are red flags that should prompt you to pause and investigate.
Knowing these frequent problems and using other verification methods in addition to a pay stub can make a big difference. Combining several verification methods helps landlords and property managers make more educated decisions when leasing property. They can lower their risk of being victims of rental fraud.
