Presented by Paystrubmakr.com By John Wolf and Tom Cullen CPA
Verifying Tenants on COVID-19
Verifying Tenants on COVID-19 time need to take into consideration the $2 trillion stimulus bill CARES (Coronavirus Aid, Relief, and Economic Security) Act That was passed by Congress to absorb the impact of the economic crisis created by the Coronavirus pandemic.
The Government and Congress created historic legislation for government funding to support small and large businesses, different industries, individuals family businesses, self-employed people as gig workers, contractors, and health workers.
The Paycheck Protection Program (PPP) helps people to maintain the rent payments Owners of rental housing could verify Eligibility for government help before renting.
An important part of tenant screening is making sure your prospective tenant has verifiable income and employment. You want to make sure the tenant has a stable source of income and that this income is from a legal occupation.
Verifying income and employment is a three-part process:
1. Requesting Paystubs and W2s, or Bank Statements and Form 4506 From IRS
The first part of verifying a prospective tenant’s income is to request the appropriate documentation from them.
For Prospective Tenants Who Have an Employer:
- Pay stubs
The simplest request is for a paystub. You will want to request pay stubs from the last two or three months. This pay stub will list the payments’ begin and end date, so you can use it to determine the tenant’s weekly, monthly, and yearly income. This pay stub will list both the gross and net (after taxes) income for the applicant. It should also list their year-to-date earnings.
As additional protection, you should ask for copies of the applicant’s W2 form. This will show how much income they declared for the previous tax year.
It will allow you to see they have had a stable income for the past year.
For Prospective Tenants Who Are Self-Employed:
- Bank Statements
Since people who are self-employed will not have a pay stub, the best thing you can do is request copies of their bank statements to verify they have income coming in.
You should request bank statements from the past two or three months to get a better picture of their average monthly income.
- File Form 4506 With the IRS
Some landlords are hesitant to rent to individuals who are self-employed because it is trickier to verify their income. One way to do this is to have the prospective tenant submit Form 4506 to the IRS, which is a request to receive a copy of the tenant’s federal tax records. The problem with this is the time it takes to receive this copy. It can take up to 60 days to process this request, and most landlords cannot wait this long to fill a vacancy.
A quicker and cheaper (free!) option is to file Form 4506-T, which is a request for a transcript of the tenant’s tax returns. This usually only takes one business day to receive and will contain the vital information you are looking for.
2. Contacting Their Employer and Issuing an Employment Verification Request
This is for prospective tenants who have an employer. To verify their employment, you will want to contact the employer directly and issue an employment verification request. This is to ensure the applicant does, in fact, work there and to verify the income claim they made.
3. Running a Credit Check
Running a credit check on a prospective tenant will give you insight into their financial health. This credit check will show you if they have been able to fulfill all of their financial obligations. You will learn their credit score, how much debt they have if they have ever filed for bankruptcy if they have any judgments against them, and even if they have ever been evicted.
While a credit report does not list a person’s current or previous employers, it does show who has run a credit check on the individual.
Employers will often run a credit check on an applicant before hiring him or her. The credit check may show you a list of employers who have also checked this tenant’s credit recently, although it does not mean they hired the applicant. You would have to delve further and contact the employer directly to determine the companies where the tenant was employed. To know more on how to make your pay stub. Visit https://paystubmakr.com/
Disclaimer: John Wolf and paystubmakr.com are making a total effort to offer accurate, competent, ethical HR management, employer, and workplace advice. We do not use the words of an attorney, and the content on the site is not given as legal advice. The website has readers from all US states, which all have different laws on these topics. The reader should look for legal advice before taking any action. The information presented on this website is offered as a general guide only.