What Are Employment Verification And Proof Of Income Documents?
The need to provide proof of income and employment verification documents can come from various entities, such as financiers, landlords, social service agencies, and many others. In addition, your income can determine many other things, including the loan amount you can qualify for, health insurance plans, etc.
To that end, there are various documents, such as pay stubs, you can use to verify your employment status and to show proof of income. This article discusses the documents you can use to verify employment and proof of income.
What Are Employment Verification And Proof Of Income Documents?
These documents serve as a way for organizations and companies to determine if individuals have the necessary qualifications and are currently employed. These documents generally carry the employment and income information of an individual.
Reasons You May Need To Verify Employment And Proof Of Income
There are several times an entity may need verification of employment documents or proof of income. Some of the reasons you may be required to show these documents include the following:
Lenders are interested in your income and employment status as it’ll help them gauge your ability to repay a loan should they grant it to you. Your employment and income play a role in how well you can manage your financial obligations. The lenders’ intent is usually to determine how the repayment plan fits with your take-home income from your employment and pay stub documentation. Whether it be a request for a bank loan or an auto loan, lenders require a proof of income to able to assess if you'd be able to pay them back.
Applying For A Credit Card
Credit card companies look at several factors before issuing cards to applicants, including employment and income. Similar to lenders, the aim is to assess your ability to pay your credit card payments on time. While your salary doesn’t play a role in your credit score, it sheds some light on your ability and likelihood of making payments promptly.
Looking To Rent
Once you’ve entered into a lease with property owners, they can be challenging to break. A landlord will strive to ensure that you’ll be able to pay rent on time throughout the tenancy.
An employer can verify that you’ve held a position in a particular company and the responsibilities you held. If you’re on a working visa, you need to provide employment verification documents to get an extended stay.
Documents You Can Use Verify Employment And Show Proof of Income
Depending on the verifying entity, some documents carry more weight than others. Some situations demand a combination of verification documents, while others only require one.
This list is by no means exhaustive, but it can give you a clear idea of what documents you may need. It also guides you on where you can get the documents and why some documents seem to carry more authority than others.
However, these documents must contain the following information:
Date of issue of the document
Your full name and other identifying information, particularly your Social Security Number (SSN)
Amount of income
Employer’s name (if applicable)
Common Employment Verification Documents
To ensure all the individuals hired are eligible to work in the U.S., employers must verify employees’ identity and authorization for employment. Look at some of the documents you can use to complete this process:
Employment Verification Letter
This letter is also known as proof of employment (POE), and it’s among the most common employment verification documents required. Your employer issues this letter to certify your employment status and the roles you’re claiming to have held.
Mortgage lenders also request a Written Verification of Employment (WVOE) before you can qualify for a home loan. The content of these letters can vary, but they are generally centered on your job title, dates of employment, and job responsibilities.
For financing or lease purposes, the letter will include your monthly income. The information necessary to complete the employment verification letter includes:
Employer’s details, such as business name and address, which the verifying entity can get from the company’s letterhead.
Verifier’s name and address
Employee’s name, job title, and SSN
Dates of employment and list of responsibilities (if required)
Employee’s income, including allowances and bonuses
Unemployment Verification Form
If you’ve been terminated from employment without a just cause, you can apply for support in your state’s unemployment insurance. While each state has different application requirements, they all comprise a section where you give the reason the employer terminated your services and your earnings statement.
However, your employer can contest the claims you make on the application, slowing down the approval process.
Income Verification Documents
Now that you know the situations that demand you to show proof of income, look at the type of documents accepted as verification.
When you’re employed, either full-time or part-time at a job, where you bring home a regular paycheck, you’ll get a pay stub. A pay stub is a document that shows how much money you earn over a specific pay period. It also shows how much money the employer deducted or withheld for insurance, taxes, savings, or investments.
Typically, you get your pay stubs in every pay cycle. However, you can also request your employer to provide you with past ones to verify proof of income. The lender or landlord may contact your employer to confirm whether the paystub is genuine and accurate.
It’s a federal requirement for you to file your taxes each year. In return, you get a tax return. This document shows your earnings and income tax calculations for the previous year, providing a clear and accurate record of your earnings in a calendar year. You can use it as proof of income, too.
If you’re in jobs such as freelancing or working on contracts where you don’t get a regular paycheck, this is the best alternative document to show proof of income. It’s a legal document and verifiable. You can also use it to seek financing or renting a property. Some of the tax return documents you can use are the following:
Previous year’s tax returns (Form 1040): This form contains all your income and its sources in the same place. Always keep a copy for yourself, as it can come in handy when you need to show proof of income without your pay stubs.
Wage and tax statement (Form W-2): This form comes from your employer and gives an accurate snapshot of your income. You can always get a copy from your employer if you don’t have one with you.
Also read: How To Calculate W-2 Wages From Pay Stub?
You can use your bank statements when you have no pay stubs to show proof of income. This is because they show your transactional activity and history, such as deposits and withdrawals. However, bank statements may not be helpful in some situations, particularly when the verifier needs to see consistency in your income.
For instance, your income may fluctuate if you earn on commission or are a contractor. The bank statement highlights these changes, and a verifier can judge your ability to meet your financial obligations from it. Sometimes, it can negatively affect the verifier’s perception of your ability to pay.
Also read: How To Get A Pay Stub From Direct Deposit?
Social Security Documents
If you happen to be a beneficiary of social security payments and your way of livelihood, you can use these documents to prove your income. These are federal documents and, therefore, credible proof of income on your side. However, they carry a caveat. Social security benefits are decided by Congress and could change anytime.
Some types of court-ordered payments can act as proof of income. One type of court-ordered payment is alimony. If a potential renter receives alimony through a court-ordered payment plan, they can use that as proof of income when, say, they’re looking to lease an apartment.
Disability Insurance Documents
Without proof of income pay stub and you get disability allowance from the government, you can use the documentation you get as your proof of income.
Some jobs and career fields provide retirees with pensions where you receive a regular income. You can use these documents if you need to prove pension income for things such as a mortgage, personal loan, housing assistance, or from other verification agencies.
This is adequate proof of income in case you’re required to show your earnings. The income verification request procedures are available at the Pension Benefit Guaranty Corporation (PBGC).
If you happen to be unemployed and beneficiary of state or federal unemployment benefits or payments, you can use this to show proof of income. Notably, unemployment documentation has a duration timestamp, which means the payments stop after a certain period. Depending on why you need to show proof of income, these documents may or may not be usable in many situations.
Learn more about unemployment taxes here.
The most important part of the proof of income and employment verification is knowing and securing the most appropriate document in the situation. However, you need to provide documents that portray honest and accurate information. Making false claims or falsifying employment verification or proof of income can be damaging to your professional reputation. You may also be entitled to tax reductions due to working from home because of Covid.
Gather all the necessary documents relevant to the purpose you need them. In many cases, the verifying entity will require you to provide multiple documents as proof of employment and income. Pay stubs, letters of employment, and tax return forms, such as W2, are among the best options you have.