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How To Spot A Fake W2 Form And What To Do If You Receive One
It's possible to know how to spot a fake W2 by reviewing the document very carefully. Check for red flags or anything that looks off about it. Property managers, landlords, lenders, or loan officers need to understand how to identify if a W2 form is fake. It's useful to verify income.
These days, some people use fake W2 while making applications for loans, rents, or mortgages. This also applies to individuals who use fake pay stubs for the same purposes. Instead of creating fake pay stubs, it's more reasonable to create your document online using a paystub generator.
In this guide, we will explain how to spot a fake W2. You'll be able to properly identify a fake W2 example, other red flags, and what to do in this situation.
What Is a W-2 Form?
A W-2 form is an IRS form that's officially known as a Wage and Tax Statement. It is a form that employers are legally required to provide to each of their employees annually for the purpose of filing taxes. It has a detailed summary of their earned wages for that tax year.
A W2 majorly reports what an employee earns and their amounts withheld for the year. It contains boxes that have different amounts based on this. Typically, it includes their taxable income, gross wages, tips, other compensation, and their Social Security Taxes and Medicare taxes withheld.
On a W2 form, it must clearly show the employer's name, address, and an Employer Identification Number (EIN). It must include the employee's name, Social Security Number (SSN), and their mailing address.
Read more: How to Get a W-2 From a Previous Employer In a Few Steps.
How To Spot a Fake W2 Form
Usually, fake W-2 forms are created with a clear intent to deceive, usually when making applications. W-2 forms work as proof of income. So, when they are requested, people who don't have a legitimate W2 or meet the earning requirements tend to create fake ones. They may fabricate these income documents and include fake earnings amounts and information.
Therefore, for landlords, lenders, and institutions reviewing W-2s, it's important to identify signs that indicate it's fake. Here's how to spot a fake W2 form:
1. Formatting & Layout Inconsistencies and Spelling Errors
People who use fake W-2s most of the time use editing software to try to alter the income documents. So the formatting may look off or even suspicious. Check for documents that have multiple font types or different sizes. It may also include wrong spelling in certain fields, for example, spelling "Federal Tax" as "Fedral Tax".
Other things to also notice can be the texts appearing to look misaligned in the boxes, low- resolution images, and blurred texts. Instead, the IRS W-2 forms should have a standard and clean appearance.
2. Data Discrepancies
While reviewing, ensure to scrutinize every detail in the document. In regard to this, check the employer details. Does the company name match exactly what's found online? Does the mailing address exist? If you see an EIN that doesn't follow the federal format, you should immediately know what this is. It may also be an SSN that starts with "000". Fake data is a major red flag. Both employer and employee names should be correctly spelled as well. If not, it's mostly that they were created in a hurry, so it's fake.
3. Tax Details Errors
An employee's gross wages almost never have neat and round numbers after all deductions have been removed. This is a major red flag to check out for. Also, the tax withholdings must align with the income. It's a good idea to use simple tax calculators online to check if the federal income tax withheld matches the income and filing status.
Also check: Check out our pay stub templates here to create your professional pay stubs.
Fake W2 Example vs Real Tax Forms
Let's explain some of the common differences between real W-2 forms and fake ones:
Fake W-2 Example:
On a fake W-2, the document may look blurry or pixelated, almost like it's a scan of something. It's also possible to notice certain parts of the documents with fonts that are mismatched. For example, the employer's name is in one font, while the wage numbers are in another. Also, the borders and text boxes could be slightly misaligned, and this creates inconsistent margins.
Like we also mentioned earlier, one of the most common ways to identify is through the employee data included. For instance, the employee's salary is a perfectly round number, like $55,000.00. It may also be that the Employer Identification Number looks odd and doesn't have the standard hyphen (e.g., 123456789). Lastly, the tax withholdings may also seem low for the income that's stated on it.
Real W-2 Tax Forms:
The form simply has a professional look, and all formats align and look uniformed. All the text in the document would appear clear, and you can see it clearly. It looks like this, whether it's an original print or a digital PDF W2 copy. The layout is precise, and the boxes and lines are perfectly aligned.
The taxable income usually has precise figures, for example, $54,873.21. The EIN follows the correct XX-XXXXXXX format. The federal taxes and Social Security withholdings show accurate percentages of your gross wages.
Ways You Can Verify Fake W-2s
While it's possible to spot errors by just looking at it, there are other income verification methods. They verify that a W-2 form is legitimate. Here's a simple guide to follow to verify a W-2 document:
Cross-Reference Employer Details & EIN: Don't just look at the EIN. Make sure to verify it. To do this, use the IRS's free EIN Lookup tool or other databases. This helps to confirm that the claimed business exists and that the name and number match. This method is a simple way to catch those with legitimate employers.
Verify Income with Supporting Documentation: You may consider not using only a W-2 to verify income. Always request recent pay stubs and bank statements. The amounts that are on their year-to-date (YTD) totals on the final pay stub should match the annual totals on the W-2. Also, the applicant's bank statements should show deposit amounts that are consistent and should align with their salary.
Conduct Direct Employer Verification: Another way that is definitely reliable is to directly contact the employer that's listed on the document. Rather than using the phone number on the form, search for their website online or use a directory. Call the number to confirm. Speak to the HR or payroll department to verify the individual's employment history. While they may not disclose their specific salary compensation, they can confirm if the individual is truly an employee. This confirms that their stated tenure and role are accurate.
Use Official Resources: This works more for high-stakes verification. For further verification, the applicant should provide an IRS Wage and Income Transcript. It is a summary of the tax data that's reported to the Internal Revenue Service. To also verify their SSN verification, businesses can use the Social Security Administration's Consent-Based Social Security Number Verification (CBSV) service.
Read more: What Is A Year-End Paystub? W-2 Vs Last Paystub For Taxes
Fake W-2 Forms Protection Methods
We'll explain effective W-2 measures that different landlords, loan officers, and institutions can adopt. These measures ensure that they protect themself from receiving fake forms:
For Property Managers / Landlords
Property managers use income-to-rent ratios. These are typically 2.5 or 3 times the monthly rent. A fake W-2 clearly wants to meet this threshold, so here's what landlords can apply:
Create a Documentation Package: Instead of accepting W-2s, create other income documents required. Your application checklist should require that rental or loan applicants provide a W-2. Then, the two most recent pay stubs and two months of bank statements.
Make Your Cross-Check Method Standard: Create a verification worksheet. Then, confirm the name and dates match across all financial documents. Ensure the YTD earnings on the pay stub align with the W-2. Always verify the employer by searching online.
While applying these, be consistent and apply them to every applicant. Also, ensure you comply with fair housing laws to create a defensible process.
For Lenders & Financial Institutions
They can create:
Manual Review Process: While reviewing a borrower's income, every manual review process should be done properly. Check all the formatting and data red flags. Then move to advanced steps. This includes verifying their EIN. Try to also compare the W-2 income to the income reported on the applicant's tax returns. Use an IRS Form 4506-C transcript for this.
Use AI Technology: Usually, lenders and institutions deal with a lot more applications. So, they may use AI-powered fraud detection solutions. These tools help to automate the screening of W-2 forms and other financial documents. And within a short time, they can detect any suspicious document that was submitted.
Also check:Paystub creator to make accurate pay statements for personal use.
What To Do if You Detect a Fake W-2
During the income verification process, you may notice that the document presented is fake. It's important to handle the situation professionally.
Document Everything: It is important to keep a record of the suspicious documents. Keep a note that indicates the particular areas of discrepancy.
Confront Respectfully: Inform the applicant that you cannot verify their information. Then, give them an opportunity to explain or provide alternative supporting documentation. There might be a simple clerical error.
Make a Decision: If the explanation is not satisfactory, you can then deny the application. This is because you cannot verify the income.
Report if Necessary: In cases of suspected fraud, consider reporting the incident. Although it's not always necessary, you may report it to the concerned authorities. For example, the Internet Crime Complaint Center (IC3).
Manual Review vs Machine Learning Software for Fraud Detection
Manually reviewing applications has risks, too. It may be time-consuming and may not always detect fake documents. However, more people now adopt machine learning software and AI-powered fraud detection platforms. They are more accurate and conduct deeper analysis in order to detect fake W-2s. They perform:
Metadata & Digital Footprint Analysis: They examine the file's hidden metadata. Through this, they check the dates it was created and its modification history. It also detects the editing software that was used to generate the document.
Pixel Examination: Some advanced algorithms conduct copy-move detection and image splicing analysis. They identify font anomalies, including the differences in various pixels.
Automated Cross-Referencing and Validation: These systems can cross-reference EINs with business databases. They can validate SSN formats. They also perform mathematical validation of all tax withholdings against current IRS tables.
Intelligent Document Processing (IDP): It processes documents automatically. This tool then cross-references information with external sources. It also performs data extraction and detects if any document tampering has occurred.
Further reading: How To File Taxes With Multiple W2 Forms
Closing Thoughts
Knowing how to spot a fake W2 can help make every application process easier. It simply involves reviewing the document thoroughly. It also involves checking for red flags within the document. Red flags like poor formatting, data errors, and math inaccuracies are signs. Always cross-reference every applicant's employer EINs. It's also a good idea to request supporting documentation and contact the employer directly.
A more suitable solution to creating fake W-2s is to use our W2 generator. In case you need your document urgently, we've got you covered, so you don't need a fake W2. To create pay stubs as well, our check stub maker should be your go-to solution. To use our tools, it only takes simple processes. Then, you can generate professional documents instantly. Get started with us today!
