Human Resources News & Insights

Answers to tricky HR questions: Can we ask for candidates’ tax return info?

Our team of experts fields real-life, everyday questions from HR managers and gives practical answers that can be applied by any HR pro in the same situation. Today’s issue: Applicants’ tax returns and W-2s.

Q: We’ve been hearing a lot in the news about certain companies asking for applicants’ W-2s or tax returns. Is that legal?

A: Yes – for the most part, says Anthony Zaller (azaller@vtzlaw.com) on California Employment Law Report.

Some firms ask for candidates’ W-2s or tax returns to verify applicants’ past salary. Though the practice isn’t universal, it is common in certain industries — like financial services — and for certain positions, like sales jobs.

The practice can also be useful in the rare instance that an applicants’ former company has gone out of business and salary and employment info can’t be verified.

There’s nothing that legally prevents employers from asking for information about candidates’ tax returns or W-2s. But there may be info included on those forms that you don’t want to see because of problems that could arise later.

That includes Social Security numbers and info like dependent care credits, nontaxable sick pay and adoption benefits that suggest a candidate is in a protected class.

Best bet: If you’re going to ask candidates for W-2s or tax returns, request that they remove that kind of sensitive info before giving you copies.

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Comments

  1. Job Candidate says:

    I will not give out tax return or W2 to anyone. What I earn right now, or what I have earned in the past, has no bearing on the potential new job and its worth to the employer. Tell us what the pay range is for the position, and stop playing these kinds of games.

  2. @Job Candidate…I agree, it is none of the potential employer’s business.

  3. DailyObserver says:

    Candidate and MMAN – just what I was thinking as I read this. Indeed, what bearing does your previous salary have on the next? They want to know simply to peg you at about a 10% increase above your current salary, even though with a recession on, your increases were likely small or were frozen, while prices rose. Seems that many employers are getting away with paying salaries that were considered good 15 years ago, as there is no shortage of workers willing to take less to rejoin the workforce. I can’t blame them, or an employer for getting a good person at below market value. It is just the times we are living in. However, no one should be forced to disclose their previous salary. Simply answer the question with a statement similar to: “After researching the salaries of professionals in this region, with skills and experience similar to mine, I found that fair compensation for this role is between X and Y.” Don’t lowball your bottom figure thinking it’s a safe place to start because that will likely be the salary your prospective employer starts the bidding with. That bottom figure should be at least 10% above your most recent salary.

  4. Joanna G. says:

    Isn’t it simply dishonest and unfair to dig into someone life, income etc to determine “how cheap we get” well qualified, experienced employee who maybe somewhat desperate or in need? Whether to obtain better paid employment or professional challege to grow or for greater potential, we choose to change jobs, and it is person’s business why.
    If employer asks for copies of W-2s or 1040 Forms, it shows from the very start, it is not a place where one wish to be. Trust me.

  5. @DailyObserver…many employers do this under the guise of verifying job responsibilities (i.e. a candidate claims they were an IT manager, for example, in a previous position so a potential employer may want to see if their previous pay is commensurate to the position they claim they held to back up the claim, this could also be true for a salesperson who claims they made $X in commissions). However, I feel that the real reason is to see how cheap they can aquire talent.

  6. We only ask for tax return info in the rare (though not so rare these days) cases when a candidate’s former employer is no longer in business or existence, as stated in the article. We do this to verify that they actually worked there, not to verify their salary. It’s not a guise. It’s the only way we can think of to verify employment under those circumstances. If you’re being ethical and truthful on your application and resume, there should be no hesitation/fear to share documentation to back it up. In one instance, we googled the address of an applicant’s “former employer” stated as a large car dealership that just went out of business. Google street view showed a small shack with open fields surrounding it. We’re not looking for ways not to hire someone, we are just working in the best interest of the company.

  7. @KMP…I see where you are coming from here but you are talking about an exception here and not the rule. I think most of this article is, if you have read it, dealing with companies trying to verify salary and not necessarily previous employment which is problematic for me. So I disagree with you that even if you are being truthful and ethical, you should only in circumstances such as what you mentioned, be asked to provide W2s. Even in this case, I think I would black out my former earnings. After all, the previous employment verification is all you are looking for correct?

    You say there should be no fear in providing this documentation I say you are wrong. Take this hypothetical example of a person who has worked as a general laborer in a factory or retail environment for years before deciding to continue their education. This person finishes school in their respective discipline and gets a job offer in the field. Now you’re telling me that in this economy that this person wouldn’t/shouldn’t be reluctant to share his/her former salary which is probably significantly less than post education because they can be assured that the potential employer wouldn’t use this former salary as a basis to calculate the offer salary? I’m sorry, I would just not feel comfortable doing it.

  8. Its true my company did ask me to produce my W-2 when i joined for checking my previous salary. Also, there are many other companies who follow this procedure.

    Hi there just wanted to give you a quick heads up. The text in your article seem to be running off the screen in Chrome. I’m not sure if this is a formatting issue or something to do with internet browser compatibility but I thought I’d post to let you know. The design look great though! Hope you get the issue solved soon. Kudos

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