What Are Fake Pay Stubs & How Can Employment Be Verified?
July 31, 2023
It is critical to understand the connection between fake pay stubs and employment verification in order to avoid getting scammed.
After all, using pay stubs from an applicant’s or borrower’s previous employment is among the surefire ways to verify their proof of income and, by extension, their employment.
So buckle up and read on to learn the importance of knowing how to screen fake pay stubs when confirming proof of income and employment history.
- Lenders and landlords screen fake pay stubs for employment verification because pay stubs are among the key documents used to verify an applicant’s income.
- Among the main reasons why people create fake pay stubs are to qualify for a loan or lease, cover up illegal activities, and scam unsuspecting victims.
- Employment verification is a series of steps conducted by landlords, banks, and lenders to verify a borrower's or tenant’s income.
Proof of Income and Using Pay Stubs
Proof of income includes any valid document that attests to an individual’s financial status and capacity to repay loans, open a credit card account, or afford rent. These documents include pay stubs, bank statements, income tax returns, and proof of income letters.
Other acceptable proofs of income are:
- Court-mandated payments for child support (alimony)
- Profit and loss statement
- Social Security benefits
- Unemployment benefits
Banks, landlords, and even employers often request any of the sample valid documents enumerated above from new applicants, tenants, and borrowers.
Of all the documents used to verify a borrower’s source of income, pay stubs are considered the most straightforward reference. This is because pay stubs declare the regular income received by an applicant.
At the same time, pay stubs provide information about their tax withholdings, contributions, employee benefits, and wage garnishments, if any. All of this information is combined to paint a picture of an applicant’s capacity to pay rent or repay loans.
For instance, if an applicant’s pay stub shows that their average income meets or exceeds the minimum requirement for the loan or covers the rental fees, then it means they are qualified for a credit or lease.
This is also the reason why some borrowers and applicants create fake pay stubs and manipulate their employment history to secure approval for their application.
What Are Fake Pay Stubs?
Fake pay stubs are instrumental in employment verification. These are fabricated paycheck records that applicants and scammers use to try and cover up their inability to meet the qualifications for loans and renting apartments.
Receiving a fake pay stub can be detrimental to your business, particularly when the document has not been fully verified. That said, here are some clear indications of a fake pay stub:
#1. Using O Instead of 0
Since fake pay stubs are made either by scammers or individuals with no background in calculating taxes, they often mess up the small details. What they do not know is that every single detail matters on a real pay stub.
A great example is the proper use of O and 0, which are typically ignored or interchanged by fraudsters. Contrastingly, legitimate businesses hire experienced accountants and payroll personnel who are highly unlikely to commit such a mistake.
#2. Rounded Up Numbers
If you see any rounded-up numbers or missing decimals on a pay stub, it very likely means it was not prepared by a professional. Rounded values are uncommon in real pay stubs because employees have different pay rates, taxes, and deductions.
Accountants know how to calculate federal, state, and FICA taxes, insurance and retirement contributions, and court-mandated payments. As such, decimals are almost a ubiquitous sight in authentic paychecks.
#3. Unprofessional Format
Pay slips are considered official company documents and should therefore exhibit a uniform and spotless appearance. Contrastingly, fabricated paychecks are messy and carelessly put together.
You’ll see different formatting with the text, and the lines or tables aren’t perfectly aligned. You might even spot informal font choices that aren’t typically used in professional documents.
#4. Incomplete Information
Does the pay stub declare all applicable taxes withheld from the employee’s salary? Does it contain the hourly rate, year-to-date, retirement and insurance contributions, pay period, and pay date?
It is essential for pay stubs to contain complete information about each employee’s earnings because these will come in handy when filing tax returns.
#5. Lacks Security Features
Several businesses add an extra layer of security to their employee’s pay stubs to prevent scammers from duplicating the said document.
These security features include watermarks, premium-grade security paper, and visible fibers on the paycheck that make them difficult to copy or reproduce by scammers.
Meanwhile, fake pay stubs use regular paper and lack any security features or watermarks.
Why Do People Create Fake Pay Stubs?
From a tenant's or debtor’s perspective, fake pay stubs and employment verification are two terms that they wouldn’t want combined or associated with their financial background.
After all, any deliberately modified detail about their income could either mean instant rejection, penalties, or worse, possible jail time. Regardless, some still risk creating fake pay stubs.
Listed below are some of the most common reasons why people fabricate their pay records:
#1. To Get a Loan
At times, financial emergencies can push people to use desperate and risky methods just to secure money for their basic needs.
This is especially true if a person gets laid off from their job without prior notice or finds that their regular income isn’t enough to meet the minimum requirements set by the lender or bank.
It is also possible that an applicant does not have access to their last pay stubs and is unable to retrieve copies from their employer.
#2. To Rent an Apartment
Landlords are becoming stricter when assessing the employment history and income of applicants who want to rent a space on their property.
However, that doesn’t stop some applicants and even scammers from attempting to secure a place to stay. For instance, unemployed individuals want to prove that they still have a stable source of income despite not having worked for the past few months.
#3. To Scam the Government
Not all businesses are 100% legitimate and trustworthy. There are a handful of businesses that avoid their tax obligations by creating fake pay stubs and declaring made-up withheld tax amounts on their employee’s taxes and salaries.
These businesses may have notoriously evaded their taxes for a long time, and so they continue to issue fabricated paychecks to try and fool the government that they have their taxes in check.
#4. To Cover Up Illegal Activities
Aside from evading taxes, a business may also be involved in other illegal activities or scams. They create paychecks as a front to show that they are operating within lawful parameters.
Fraudsters also use falsified paychecks to secure financing while covering up their malicious operations and connections. They may even try to secure employment verification through fake pay stubs despite not having a stable job or having never been employed by any company.
How People Create Fake Pay Stubs
Unfortunately, applicants and scammers can produce fake paychecks easily as long as they are familiar with using software such as Photoshop, Excel, Word, and so on.
They will also use a real pay stub as a reference by going through their old paychecks or searching for images online.
Some go as far as to photoshop a business logo to make the fake pay stub seem more authentic and pass the verification process conducted by banks and landlords.
What is Employment Verification & How Does it Work?
Employment verification is done by lenders, banks, and landlords to assess whether an applicant or borrower meets the qualifications for the loan or lease. It is a necessary step to avoid missed rent payments and accumulated balances in the future.
Some people think they can get away with using fake pay stubs to pass employment verification or make it seem as though they have a stable job or income source.
If you are a lender or a landlord and you are not careful, you may end up losing money or, worse, find yourself entangled in fake pay stub scams.
Fortunately, there are specific steps to avoid getting scammed with falsified paycheck records:
#1. Get in Touch With the Employer
Contact the employer or business name declared in the business. You can send an email or reach out through the contact number provided.
Let the employer know that the applicant or borrower indicated them as their point of contact for verifying their employment. Focus on asking whether the applicant is currently employed by the company or not.
You can also inquire about the applicant’s tenure and check whether they have been sanctioned or suspended for any misdemeanor (especially one involving money) during their employment.
#2. Check if the Numbers Match
Calculate the values on the pay stubs to confirm whether the resulting gross and net earnings add up or not. Also, the gross pay on their pay stub should match the annual income declared on their loan or mortgage application.
To verify that the values on a debtor’s annual income and gross pay match, multiply the gross earnings by 12. Then compare the resulting value to that of their annual earnings. If it matches, then the pay stub is likely real and provides accurate information.
Also, check whether their Social Security Number and Employee Identification Number match the documents in their employer’s records. These numbers should be consistent.
#3. Check the W-2 Form
It is best to use Form W-2 for verifying the work status of employed or salaried employees. This is because a self-employed borrower may not have any W-2 to present since they report their income source on a different IRS form.
When using an applicant’s W-2 form to screen fake pay stubs and conduct employment verification, concentrate on the total income declared in the said IRS form.
The W-2 should provide values equal to the annual income declared in the application.
#4. Ask For a Letter From the Employer
Identifying fabricated work information and fake pay stubs with employment verification letters is quite common because it is also the easiest document to acquire.
Requesting an employment verification letter from the employer helps certify the applicant’s employment status.
Also called proof of employment, the said letter must also contain information about the applicant’s job role in the company, their tenure, or the start of their employment, and their salary.
Preferably, the letter should be handwritten by the employer. Additional documents and records may also be requested along with the letter, depending on whether the applicant wants to secure a loan or a mortgage.
For instance, banks may also request the name and address of the verifier or employer, a specimen of the employer’s signature, and the applicant’s Social Security Number.
#5. Look At Other Documents
Aside from the forms and pay stub-related records mentioned above, here are a few more documents you can use to solidify your employment verification process for loan, mortgage, or rent applicants:
- 1099 tax form. Self-employed debtors and applicants can submit their 1099 tax form in place of a W-2 form. This IRS form reports the income of self-employed individuals or income that is not given or disbursed by an employer.
- Bank statements. If income is directly deposited into the borrower’s bank account, you can request bank statements to prove that they are continuously receiving income through bank deposits.
- Social Security statement. It provides estimates on how much a borrower can possibly receive once they are eligible to claim their Social Security benefits. The estimates are based on the amount they have paid in FICA taxes.
#6. Run a Credit Check
A quick review of an applicant's or borrower’s credit history will give you insight into their financial behavior. By checking their credit report, you can assess whether a borrower has a history of repaying loans on time or if they are notorious for late payments.
You can do a soft credit check, which involves only looking into specific information about a borrower’s credit report. You can also conduct a hard credit check or a full search of an applicant’s credit report.
What to Do if You Received Fake Pay Stubs
Receiving fake paychecks is detrimental to your business. If you discover it late, you may suffer a significant profit loss or, worse, get entangled in a fake pay stub scam.
Here’s what you should do if you encounter fake pay stubs while conducting employment verification on a borrower:
- Contact the employer. Search the company name or employer indicated on the fake pay stub and look for the real contact information. Let the employer know that you are calling them for employment verification purposes and verify the income and all other information declared on the fake pay stub.
- Reject the application. Do not accept the loan or rental application. For landlords who discovered the fake pay stubs while a tenant was already living in their apartment, cancel the lease and have the tenant move out.
- Report to the police. Head to the local police department and file a complaint. Bring copies of the fake pay stub for evidence. Should the situation escalate, such as when a tenant refuses to leave your property, you can seek legal assistance to assist you in resolving the matter.
Fake pay stubs and employment verification go hand-in-hand in such a way that once a paycheck record is proven to be fabricated, it automatically verifies the authenticity of a borrower's or tenant’s work and financial background.
If you are not keen enough to detect what fake pay stubs are, then you are setting your business up to fail.
Fake Pay Stubs and Employment Verification FAQ
#1. Is it illegal to fake a pay stub for employment verification?
Yes. Using a fake pay stub for employment verification is illegal and a form of fraud. You are manipulating information about your employment for the sake of securing financial aid or getting approval for your rent application.
#2. Can pay stubs be verified?
You can verify pay stubs by screening the details on the stub. Look for intermixed O and 0, missing information, and sloppy formatting.
You can also contact the employer indicated in the pay stub or cross-reference the pay stub information with that of other documents submitted by the applicant for proof of income.
#3. How do landlords verify pay stubs?
Landlords are also extra careful not to approve fake pay stubs used for employment verification. They verify pay stubs by seeking the help of a professional, such as a payroll officer or an accountant, to confirm whether the values in the paycheck make sense.
They may also contact the employer and verify whether the applicant worked for the company or not.
#4. Can you get in trouble for fake pay stubs?
Yes. There are specific penalties and serious consequences for using fake pay stubs to verify employment, secure loans, or rent apartments.
These penalties include fines ranging from $1,000 to $1,000,000 and imprisonment for 1 year to 30 years.