Employers asking job seekers for W-2 or tax return

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In a weak job market, employers have been asking job applicants for a lot of new information about themselves including, in some cases, their social media passwords.

But Kevin T. of San Francisco was shocked when a prospective employer asked him to verify his salary by providing a copy of his W-2 form.

"I recently interviewed for an Amazon position and made it through the three-month interview process and was notified that they wanted to hire me. The first step in the offer process, however, was that I had to submit my previous year's W-2 or federal tax return. Without that information, they would be unable to proceed. After providing them with my W-2, they made an offer that was below the salary range they originally quoted," says Kevin, who doesn't want his last name used because he turned down the offer and doesn't want his current employer to know he's job hunting.

Kevin says his sister-in-law, a vice president of an investment firm in the Midwest, told him she has experienced the same thing when she applies for new work. "Another friend is the head of marketing at a local company and says this has become standard practice. How is this legal, and is it widespread?"

It's not illegal, but ...

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Amazon declined to comment for this column.

I checked with recruiters, lawyers, regulators and privacy experts. The consensus: Asking applicants for a W-2 or tax return is not illegal, although they do contain information that could get an employer in hot water depending on how it is used.

Nor is the practice widespread, although it is becoming more common in a job market where employers have the upper hand.

"They say, 'I want to know everything about you and I'm going to ask.' Because people are so desperate for jobs they are willing to disclose anything," says Joy Waltemath, a lawyer and managing editor at Wolters Kluwer Law and Business.

Asking applicants to provide a tax return or W-2 is more common in certain industries, such as financial services, and for certain positions, such as sales. It also happens when a former employer has gone out of business and cannot be contacted to verify employment or salary history, Waltemath says.

The Work Number, a subsidiary of Equifax that provides income- and employment-verification services, sells a service called IncomeChek that lets employers quickly retrieve a job applicant's tax data including 1040, 1099 and W-2 forms. The applicant must agree to the disclosure by signing Form 4506-T.

"Tax transcripts are available via streamlined fulfillment in hours through our direct connection with the IRS," the Work Number says on its website.

Lori Krogel, managing director of recruiting company the Mergis Group, says, "It is a common practice that companies do verify past salary. Normally, it is done during background checks," performed by a contracted third party group. "On rare occasions, we have had the client ask for the candidate to verify thru a W-2."

Although it is not illegal under federal law to ask a job applicant for a tax return or W-2, it is "unlawful for a person to disclose, use or compel the disclosure of the Social Security number of any person," Waltemath says. "It is also unlawful for a person to willfully disclose Social Security numbers obtained from tax returns or return information or to offer an item of material value in exchange for a tax return or return information."

Delete some info

She says employers should, at a minimum, ask applicants to delete their Social Security numbers on a W-2 or tax return, she says.

These forms also include information - such as nontaxable sick pay, dependent care credits and adoption benefits - that suggest an applicant might be in a class protected by federal or state antidiscrimination laws, Waltemath says.

Tax data, or lack thereof, can also reveal whether a person is unemployed. In several states (New Jersey, Oregon and the District of Columbia) it is unlawful for an employer to refuse to consider an applicant who is currently unemployed, she adds.

The California Fair Employment and Housing Act prevents discrimination on the basis of a person's race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age or sexual orientation. Employers cannot ask job applicants questions that would directly or indirectly identify them as a member of these protected classes.

This law does not, on its face, prevent employers from asking job applicants for their W-2 or tax return. However, if an employer selectively enforced the practice - and only asked members of a protected class (such as women or people of color) to produce the documents, this "likely would violate" the act, says Annmarie Billotti, chief of mediation with the Department of Fair Employment and Housing.

"Also, if the practice were imposed on all applicants, but negatively impacted a protected class or classes at a greater rate than non-protected classes, a court could find that the practice violates" the act, Billotti says.

It can be 'dangerous'

Waltemath urges companies to tread carefully when asking for this information. "It just gets dangerous," she says.

What should job hunters do if asked for their tax information?

"In a competitive job market, you will have to provide it," says Paul Stephens, director of policy and advocacy with the Privacy Rights Clearinghouse. "My recommendation: Obliterate other information on the W-2 that goes beyond your salary, including your Social Security number and (payroll) deductions."