Tuesday, August 23, 2011

Proof of Income & Direct Deposit

When purchasing on credit or filing a loan application, you will usually be requested to provide proof of income. In most cases, a paycheck stub is acceptable. However, in today's electronic-banking world, a paycheck stub may not be easily accessible when your check is direct-deposited. In most cases, any proof of income that a lender or seller can verify with a phone call will be acceptable if you cannot provide a check stub.

Paychecks
Even paychecks that are direct-deposited to your bank generate a pay stub. Most employers mail or hand-deliver these pay stubs to the appropriate employees. If for some reason you did not receive yours, ask your employer's human resources or payroll department for a duplicate copy of the stubs you need. If your employer cannot provide copies of the stubs, ask for a printout showing the dates and amounts of your most recent paychecks and have this printout notarized.

Social Security and Government Checks
While regular government checks are direct-deposited today, they also generate receipts or stubs you can use in the same fashion as payroll check stubs. These documents are mailed to you at about the same time money is deposited to your bank account. If for some reason you are not receiving these documents, you can call the originating agency and request new copies be mailed to you. You can request copies from the Social Security Administration by calling 1-800-772-1213. Contact other federal and state agencies directly; if you can't find a phone number, your bank can probably provide one.

Proof of Income From the Bank
If you can't get check-stub documentation in a timely manner, go to your bank and ask for a printout of deposits made to your account over the last six months, including the name of the depositing agency. Ask that the bank also notarize the document. In addition to this documentation, have the name and phone number of your income provider available so your income can be verified over the phone.

Federal Tax Forms
Many lenders and sellers also accept as proof of income the adjusted gross income from a recent 1040-series federal tax return. If this is not an acceptable proof of income, ask what other options are available. In most cases, lenders and buyers can mutually agree on an appropriate form of proof of income.

Fraud Potential
It is simple to falsify documents to prove income. However, falsification of income based on tax forms or federal checks is a federal crime, and falsification of non-federal documents is a crime in most states. In addition, lenders and creditors are likely to call and verify your proof of income. For borrowers, it is best to be honest and take the chance you may be turned down; for lenders, the adage "trust, but verify" is the wisest course of action.


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