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Weigh your risks before asking job applicants for W-2s or tax returns

June 1st, 2012  |  Lorene Park  |  25 Comments

When conducting background checks, many employers try to verify the prior salaries reported by applicants. This is particularly true for positions where salary is tied to performance (e.g., sales positions). Historically, salary could be readily verified by contacting former employers; however, companies these days are less willing to share such information due to legal concerns. In response, employers conducting background checks have turned to asking for a job candidate’s W-2 or tax return. There are several legal issues that should be considered before adopting this approach, however.

Asking applicants for a tax return or W-2 (which contains tax return information) is not illegal under federal law, but state law must also be considered. For example, it is unlawful in Rhode Island for an employer to require an applicant to provide a federal or state income tax return or related tax documents as a condition of being considered for employment (RI Gen Laws Sec. 28-6.9-1). According to Joy Waltemath, Portfolio Managing Editor at Wolters Kluwer Law & Business, employers should also be aware that the completed forms contain information that could cause legal problems depending on how it is used. For example, the forms include the individual’s Social Security number, which is subject to certain privacy protections under many state laws.

Employers must be cautious in requesting a tax return or W-2 and should at least ask the applicant to redact the Social Security number on requested forms. Waltemath identified other issues for employers to consider, including the following:

  • Tax forms include other information which might disclose that an applicant is in a class protected by federal or state discrimination laws such as nontaxable sick pay, adoption benefits, and dependent care credits.
  • Requesting tax information inconsistently and from only certain groups could run afoul of discrimination laws if the group is a protected class.
  • Tax forms may reveal that a person is unemployed, and in several states, it is unlawful for an employer to refuse to consider applicants based on employment status. There is currently no federal law prohibiting discrimination against the unemployed. However, the practice arguably has a disparate impact on minorities, older workers, and individuals with disabilities, who have higher unemployment rates.
  • Applicants may feel that a request for a prior employer’s W-2 is overly intrusive, and some stronger candidates may be unwilling to continue the application process.

In addition to these issues, identity theft has become a major problem and employers seeking personally identifiable tax information should take measures to maintain its security. If, despite the risks, employers decide to request tax returns or W-2s from applicants, they should consider taking these actions:

  • Try other less intrusive means to get the salary information (e.g., contacting a former employer) before resorting to a request for tax documents.
  • Request the information uniformly (i.e., not only from certain individuals) and instruct applicants to redact Social Security numbers from the tax documents. It should go without saying that Social Security numbers should only be used for legitimate purposes such as verifying eligibility to work under immigration laws.
  • Enforce written procedures for handling the information requested, including the proper disposal of records.
  • Limit access to sensitive information to employees with a legitimate need to see it.
  • To the extent tax information is provided in electronic form, take special protective measures to reduce identity theft, such as keeping computer terminals locked, requiring login procedures and passwords, and prohibiting employees from leaving computers with sensitive data in areas vulnerable to theft, such as in vehicles. Comply with all security breach notification laws.

By following these measures, employers can alleviate some of the legal concerns raised above.

Responses

  1. Abe says:

    August 1st, 2012 at 7:24 pm

    I just had an employer ask me for the past three years tax returns during the selection process. They told me it was to verify that I was self-employed during these years. This happened AFTER thier 3rd party verification company performed a background check and verified me though the SOS web site.

    I told them HELL no, and good luck finding a sucker that will tolerate this. It is none of thier damn business, and all they really want to do is low-ball me on the job offer.

  2. lee says:

    October 4th, 2012 at 4:32 pm

    Never give it to them-Just another bully tactic “lazy and incompetent” HR twerps are using to bother people because they know it is a tight market.

  3. Colin says:

    May 27th, 2013 at 11:15 am

    Same here. A prospective employer has this as a requirement to proceed. I said that I’ve never had to in the past and see no reason why now. I already gave them two recent paystubs. It may not be against Federal law, but it puts highly personal legal information out there to “accidentally” get lost or stolen.

  4. D. C. says:

    June 26th, 2013 at 10:55 pm

    I was just offered a position with a great salary and am willing to walk away because the contract firm I’m supposedly working for is asking me for my state and fed taxes. I’ve never been asked for this before and if they don’t except that I’m not going to give it to them; then I’ll have to apologize to manager of the company who hired me and walk away. How far are we willing to go before every right we have will be stripped away from us…

  5. realitybites says:

    October 15th, 2013 at 10:29 am

    I’m in shock- it’s happening to me right now. I’ve been working as a contractor in digital advertising for the last four years, for some big name agencies and none of them have ever asked for my tax returns. Well, I’ve been working on this contract for about a week (it’s expected to go for 6 weeks) and even though I’m just a contractor, the company requires a background check. I completed it yesterday. Today, I get a note from the 3rd party conducting the search and they “need” a “professionally prepared tax return or 1099.” They don’t say why. I mean, I’m already working here! On a temporary contract! What business is it of theirs what I made before? What business is it of theirs if I was working or wasn’t before this? I’m already hired. I cannot believe that this is legal, but apparently, it is. Why do so many people allow it? It’s appalling what power companies feel entitled to. I’m not going to respond to this request and if they come after me, I’m willing to walk away.

  6. M.B says:

    October 16th, 2013 at 9:47 pm

    It’s happening to me too. I was recently hired by Citibank and have been working for them for 1 month. I received an email from the 3rd party company they hired to do a background check requesting for w2’s’. I already provided them as i didn’t read these comments before but after reading this, I agree with everyone else.. We should not let this happen! Someone in this situation should walk away! In my case, they couldn’t verify previous employment due to these companies being currently closed. But they don’t understand that we just went through a recesion and that most small businesses are currently closed! I had to send w2’s for the past 6 years! They specifcally asked me for every year!!!

  7. James says:

    October 29th, 2013 at 2:02 am

    Boeing Just done this to me also. I work in the cleared work force. I to get his position required a 10 year background investigation; your finances are also investigated. I’d been chosen for a FSP position (Full Scope). I passed the drug screen, medical screen, and security background screen. But as a part of the employment screening process I was asked to supply my w2’s from 2006 though 2012 and 2 recent pay stubs. I fought this request because I knew it had nothing to with my background investigation. I have an active clearance. I asked that if I’m going to be forced to provide my salary information I wanted in writing that I’m being mandated to do so. They refused to put anything in writing, and ultimately rescinded my offer because we couldn’t come to terms on this matter. Their has to be a legal standard for potential candidates in regards to privacy rights.

  8. Andy says:

    November 2nd, 2013 at 4:03 pm

    I just received an offer via email from Carousel Industries after going through a 6 week hiring process. In the email they also asked for my w-2. I discussed the w-2 request with the HR representative and expressed my concerns in providing such information. Ultimately stating that I am not willing to provide the w-2. Within 3 hours of having that conversation I received an email thanking me for my time but Carousel has decided to rescind the offer.

    Carousel is based out of RI. Is this legal?

    Thanks

  9. RIOceandrifter says:

    November 4th, 2013 at 9:25 am

    On Thursday (October 31, 2013) evening I was presented with an offer of employment, via email, from Carousel Industries based in Exeter RI. In the email were the compensation terms (previously agreed to) and a request for my 2012 W-2.

    On Friday morning I spoke with the HR representative about the request for my W-2 ultimately indicating that I am not willing to provide that information. It was her suggestion to have a conference call with other HR representation (it was beyond her scope to address), the hiring manager and myself to which I agreed. Within 3 hours after hanging up with the HR rep. I receive an email, cc’ing the hiring manager, with the following in the body:

    “This email is to inform you that we have decided to rescind our verbal offer to you for the position at Carousel. We appreciate the time you spent with us all throughout the process, and we wish you the best.”

    Is it legal for a company in RI to request W-2 information? Is it legal to rescind a job offer received via email for refusing to provide a W-2?

    Thanks

    Andy

  10. cj says:

    March 18th, 2014 at 9:25 pm

    I also was recently asked for a reference and background check and I provided all the required information.
    I then received an email asking for my recent W2.
    I politely responded that it was with my accountant (after all it IS tax season) and.not available.
    I was then asked for previous years W2s.
    Thank you, but no!
    I previously worked for this company and therefore.they should have my W2’s from the years I worked for them.
    Also, in this day and age of identity theft I think not.
    I agree this is a way for companies to make a lower offer of pay instead of paying what the position is worth to a qualified candidate.
    Companies wonder why they have turn over! This is one of those reasons. Those of us who are gainfully employed and sought after don’t need to succumb to these unethical tactics.
    You get what you pay for. Good luck finding an executive.that will give into such nonsense!

  11. paystub says:

    June 12th, 2014 at 11:33 pm

    For background check of employees salaries most companies asks for their recent pay stubs document not for tax returns.

  12. angie says:

    February 28th, 2015 at 9:55 am

    After completing my background check and being a contractor for a University for 6 months I am being told the 3rd party cannot find my records for 2 employers….and they need the 1st 2 pages of my tax records for 2007 to 2011…or the 1099 data and or W2…
    I am in Texas…

  13. Charles says:

    April 3rd, 2015 at 11:34 pm

    I have a signed offer sheet from a staffing company for a position with a fortune 500 company Southlake, Texas. A third party background checking agency just sent me an email asking for my W2’s from 2008 through 2014. The BG agency saying to move forward they need the W2’s because one of my former employers says they have no records of me ever working for them. This is the first time I’ve ever been asked for such personal information from a private company. This is extremely intrusive and communistic if you ask me. I don’t believe in giving for profit companies my personal tax information.This is way beyond what I willing to give for a job.

  14. No Name says:

    December 21st, 2015 at 12:09 pm

    There are couple of thousand companies operating to recruit American workers and you will receive their calls on average 30 a day. Many of them need personal Information. You never know where your personal information is going, and if you don’t give, you wouldn’t get a job, and working environments are undesirable because of groupism.

    Also another fact is that IBM, Microsoft, Oracle, Exon Mobile, chains of hotels like Marriott, etc., operate in Middle East (Dubai, Saudi Arabia, Qatar) and have no issue with their ratings. But if an individual works in Middle East, his ratings goes to zero and will struggle to get employment in united states of America.

  15. Jada says:

    February 18th, 2016 at 6:45 pm

    I recently received a job offer via email and signed it and returned to HR. The company requested a background check, SAFE and criminal background check. Three days letter they requested W-2 or paystub of my current job. Why is this? They mentioned in the offer letter they wouldn’t do an employment verification with current employer. How should I respond to the request with out losing my job offer?

  16. Max says says:

    June 17th, 2016 at 12:14 pm

    After the offer was signed and 3 days before start date the company HR sent an e-mail of the results of my background check. They could not verify employment of 2 previous companies and the school I attended. My e-mail response was, the school must have sold to another entity which was mentioned as a possibility from a call I received from past background check. Therefore, I sent them a copy of my diploma and additional document copies such as recommendation from instructors with the school letterhead and certs of achievement. On the 2 companies, I sent them copies of their offer letters with the HR names and phone numbers and mentioned hope this would help and further added one of the references you called is employed by one of the companies whom I worked with during my tenure and others in another company for employment validation. Of course the 2 companies HR was listed in my application and references as well. Why do they need my W2?! I have received the offer and signed it. If my numbers do not match is this ground for dismissal. I do not remember all this details and I went to 2 phone and 2 face to face interviews. Whoever this background source is perhaps lazy and not persistent to get the info from the 2 companies who are too busy perhaps. What is the recourse for people not doing their jobs? Would getting a provo atty to prevent this practice by companies recommended? There must be a lot of this going on and employees are fighting the Goliaths. Finally, thanks to Lorene Park’s above info.

  17. Jen says:

    August 10th, 2016 at 8:37 am

    My Company wants to start requiring w2’s, but not for all positions. I feel that this is unethical and I am trying to dissuade them not to. However I have also let them know that it is not illegal to ask. That being said I would have to do this for all positions as to exclude a group could be grounds for discrimination. We already do a background check. My answer to those of you facing this dilemma would be to provide a copy of the W2 and black out all but the last 4 of the social security number and black out the wage information. Then you can state that you have complied with the request but feel that they should trust you that you are being transparent.

  18. Kevin says:

    August 19th, 2016 at 12:39 am

    I just had an employment agency (Randstad) to ask me for SEVEN years of previous W2’s along with copies of my college degrees. This was for a $14 an hour customer service job. I am simply flabbergasted! WTF?? I am actually going to report this to the EEOC in my state as I believe it is discrimination if they are not asking each and every candidate for this information. There is no way in hell that every candidate for a call center job is providing this information. If someone asks you for this amount of data when they have already conducted a background check, MAJOR RED FLAG. Why do we allow these companies to strip away our rights??

  19. Lisa says:

    April 15th, 2017 at 12:13 am

    I am in the process of a background check for a large medical company. The company who is doing the check has just asked my for 18 years worth of W2 ’s,(that’s how do ng I was with my last employer), to verify my employment. I feel like this is very intrusive, but I’m wondering if this is the new normal. Considering withdrawing my application. I am deep in the process, have not been given a formal offer, but salary has been discussed. Advice?

  20. Earhly says:

    May 30th, 2017 at 7:59 pm

    I was just asked for this from Elsevier, I told the HR lady hello NO, if your not an accountant and need to do my taxes I’m not sending sh,..! Are you nuts?

  21. Caroline says:

    May 31st, 2017 at 5:32 pm

    I have worked for the same employer – law offices, for 30 years –20 as an employee and 10 as an independent contractor. My hours have been cut, due to all but one of the attorneys retiring. So, I am looking for another part-time job, while still working the current job. The job I am looking at provides medical benefits with only 20 hours of work. It is for a cashier, $11 an hour, but more if they feel you have relevant experience. I first went to their Meet and Greet event and spoke with 3 persons. I then did an on-line application. Then I was email contacted by a third party background check company and asked for further information, esp. since I don’t want my current employer contacted. I emailed back the most recent 5 months of invoices with photocopied payment checks, 4 business references, start and ending dates for education. I received an email stating that the start date on the education info. was not what I stated, so I called the school and confirmed my dates were correct — the checker had only verified a summer course 12 years later, not the 2 years for which I received an AES degree (sloppy). Then I received an email saying that I hadn’t supplied enough info with regard to the tenure of my current job. So they want W-2’s, 1099’s, paystubs for 30 years??? I wrote back saying I knew by law I had to keep 7 years worth and could provide them with 2006, since I had easy access to that far back and it would be the same format, invoices from 3 attorneys with photocopied payment checks on them. But, I totally question the reason for this. I also told them via email that the 4 business references were attorneys I had either directly worked with or for, covering the 30 year period of time.

    I have read all the comments in this thread. What is the reasoning for asking for my “entire tenure with the law firm”, with regard to W-2’s/paystubs? I want the health insurance as it is good coverage for only 20 hours of work, and really don’t care a whole lot about the pay (more would be nice, but is not the main reason for getting the job). It has been several days now and I have heard nothing from the background checking company, when before I received 3 emails asking for more information, 3 days in a row. I know this company has this reputation, but this request is very strange to me. For an $11/hr cashier job? Would appreciate any input available. Thanks.

  22. MaryAnn says:

    June 10th, 2017 at 1:19 am

    I just had a similar situation where a major healthcare corporation that uses a background check company required my tax returns and W-2 forms for preemployment. Had I known this, I never would have applied to the company.

    There were red flags even before this that I didn’t heed, including the fact that the company was under sanction from the government, and this specific position has been vacated at least 4 times in the last three years. This was glossed over when questioned at two interviews.

    In any case, of course, I refused and also withdrew my application, as the HR rep said this was their policy -
    supply your tax returns and W2s or no job. Apparently, my references and experience weren’t enough.

    Sadly,the background people who contacted me over several days weren’t even familiar with the common professional associations for the credentials they were checking. In addition, I believe this background checking organization was outsourced overseas because each time I responded to them over the phone, the connection was somewhat static and garbled.

    I guess now when you apply for a job you need to ask them up front if they want your personal tax returns and W-2s as a condition of preemployment. Live and learn.

  23. Anna says:

    July 28th, 2017 at 2:50 pm

    Has anyone supplied this information, but with all personal information (SSN, Salary, excemptions, etc) blacked out? The only visible information is Company info, my name and address. I’m considering this option as I am being told its a way to verify employment. I will walk away from the offer if this isnt’ acceptable, but wondering if anyone else has done this?

  24. C Leiz says:

    December 4th, 2017 at 7:29 am

    An offer was extended and accepted. Drug screen and background check information completed. Three days later, three emails and a voicemail from a NYS area code come to me requesting W2s and 1099s issued from companies that are international, well established and easily accessible to verify employment.

    Documents are for IRS eyes only.

  25. Brian Pettrie says:

    December 21st, 2017 at 12:39 pm

    I’m dealing with this right now. I’m currently a contractor but they want to hire me permanently with Anthem. Hireright is asking for 1099 or W2’s to verify job dates. Keep in mind, I listed the correct jobs but I was off by a few months for a couple of them. They did their own background check and found that out, now they’re asking me to provide this information. Why when you just ran a check and I just went through a background check with Hireright before I got hired by the contractor. And they want this by 12/26? How am I supposed to get this info in 5 days?

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