Contractors are not classified as employees, therefore the company they are contracting with cannot verify their employment or income.
For income verifications, there are a few ways to complete the verification, depending on the type of contractor and type of verification. If this is a “soft” income verification (i.e. as part of a rental application), you may only need to see proof of income. This can be done through bank statements, copies of 1099 forms, or other transcripts that show payment (i.e. driving records for Lyft and Uber drivers). If it is a “hard” income verification (i.e. as part of a loan or mortgage application), you will need to use the Income Verification Express Service provided by the IRS. This service provides verified requesters with official 1099 and W2 transcripts directly from the IRS.
For employment verifications, contractors may be able to obtain a letter from the company stating their status as a contractor. This is true for companies in the on-demand economy, such as Uber, Lyft, and Instacart. The request for a letter should be made directly by the contractor.
Under Fannie Mae regulations, lenders must verify income through federal tax returns when a borrower has commission earnings that amount to 25% or more of the borrower’s total employment income. To do this, lenders must enroll with the Income Verification Express Service provided by the IRS.
To verify the employment for an employee on a commission-based salary, reach out to the company or submit your request through Truework’s employment verification platform.
There are a couple of different ways to verify income and employment if an employee’s company has gone out of business.
For employment verifications, the easiest way is to ask for a reference to a former manager or supervisor. If you are looking for a more concrete way to verify employment, you can request 1099 or W2 records be provided instead of a reference.
For income verifications, you will need to request official tax records when the individual’s company is no longer in business. For “soft” income verifications, this can be done by asking the employee for a copy of his 1099 or W2 forms. For income verifications that are part of a loan application, you will need to request these forms directly through the Income Verification Express Service provided by the IRS.
If you are in the process of completing an employment or income verification and the employer cannot locate the employee in their system, it may be caused by one or more of the following:
If the employee still cannot be found, you will need to follow up with the employee to eliminate any possibility of falsification.
According to article 603 of the Fair Credit Reporting Act, employees must consent orally in writing before verification is submitted.
Many verification services, including Truework, require a signed employee authorization form before completing an income or employment verification.
Whether or not an electronic signature is acceptable will depend on the verification service. At Truework, we accept electronic signatures only from trusted vendors and lending institutions, preferring a full signature where possible.
No. The Fair Credit and Reporting Act (FCRA), which came into effect in 2011, states that the requester must have “a legitimate business need for the information”. Typical use cases include:
Regardless, requesters must establish “clear and conspicuous disclosure” before making the request and you, the individual, must provide written authorization as well.
The time to request an employment or income verification will depend on the provider used by your employer. Typical requests take up to 72 hours.
Still waiting on a completed verification? Talk to your employer about getting set up with Truework, where 75% of requests are completed within 2 hours.
Employment and income verifications are crucial in a number of high-impact decisions. These include:
Verifications provide additional assurance to the individual or collective decision maker by mitigating risk against future financial loss.
Equifax, the consumer credit reporting agency that owns and operates the Work Number, suffered a serious data breach in 2017. This breach exposed sensitive personal information of 143 million Americans as well as information for more than 200,000 credit and debit cards. On October 8, 2017 the Work Number portal was taken offline to address security concerns. The online portal was fully reopened on November 2.
If you are concerned about the security of your employment and income verifications, be sure to talk with your HR department to learn if your company currently uses the Work Number.
Experian or any of the “big 3” consumer credit reporting agencies won't change your credit score when an employment verification is done.
However, many applications that require an employment verification also require a “hard” credit check, which could have a negative effect on your credit score. These include auto-loan applications, rental applications, student loan applications, mortgage applications as well as applications for credit cards. If you are completing multiple applications like these at the same time, you may see your credit score negatively impacted.
The short answer is “yes”, but the longer answer is “you may not want to”. Income and employment verifications are often required by law when applying for a loan or mortgage. In order to stop verifications from occurring in these circumstances, you will be required to terminate your application.
Other instances, such as a rental application or application to a new job, do not legally require employment or income verifications. In fact, some states prohibit employers from seeking candidate salary information. Employment verifications, when purposeful, are never prohibited, however.
If you do not wish an employer or property owner to pursue an employment or income verification, you can rescind your application or discuss directly with the requesting party.
Employment and income verifications typically do cost money, but rarely is that cost passed on directly to the employee. In the case of a loan application, the cost of verifications is often taken from the loan processing fee, charged to the applicant by the lending institution or property owner. Requesters are willing to pay for this service as it expedites the application process when compared to the alternative option, which requires a request to the IRS for the release of individual tax records.
If you are a contractor (i.e. you receive 1099 instead of a W2 form), your employer is generally unable to complete your employment or income verification when asked by a requester.
If you are looking for a “soft” employment verification (i.e. from a future employer as part of a job application or a property owner as a part of a rental application), you may be able to ask your current employer for a letter addressing your status as a contractor and the expected length of the contract.
If you need a “hard” income or employment verification (i.e. as a part of a loan or mortgage application), you should first start by discussing with the requester your status as a contractor. The requester will still need to verify your income, however, which will require the release of your tax records from the IRS through their Income Verification Express Service (IVES). This process should be completed by the requester only after they receive your written consent.
If your previous employer is now out-of-business, you will still be able to complete income and employment verifications. Depending on the request, it may be enough to share the contact information of a previous manager in order to complete the verification.
If you need additional information to complete your verification, especially regarding income, it may be necessary to request official records from the government. This can be done one of two ways:
Before submitting your request, be sure to talk with the requester to better understand what information they require.