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Beware of Tenant Tax Return Scams

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tax return scam

Yes being a landlord is just great sometimes, isn’t it (thinly-veiled sarcasm…)?  From time to time most rental property landlords must contend with non-payers, property damage, tenant crime, and a whole host of other undesirable behaviors.  And now there is a new scam in town – the dreaded tax return scam.

Basically, the scam boils down to an unscrupulous tenant stealing someone else’s identity, and then using this information to file a bogus tax return.  The bogus tax return can then be used as income proof to rent a property.  Obviously, this is troublesome because people that do this usually have criminal intentions.  In other words, they might use the property for illegal activities, or they might fail to ever pay rent and then skip town when the landlord starts pressuring them.

In either case, the landlord could be held accountable by law enforcement officials, or could face financial hardship by virtue of the lost income, fines, or paying for damages to the property.  Plus, the landlord will never know the true identity of the scammer, and hence it would be impossible to track him or her down for compensation.

Therefore, it’s critical to always perform a complete background check on any prospective new tenant.  Never take tenant-provided documentation as proof of anything.  Always meet tenants in person and have them complete a rental application.  Also ask for a photo ID so you can verify the information.  As you check the ID, keep an eye on the tenant’s reaction; if he or she appears nervous, consider that a red flag.  Also, beware of out-of-state IDs and be prepared to apply extra due diligence in these situations.  Also, make sure you do a credit check, perform a criminal record check, and check references (previous landlords and current employers at a minimum).  Also ask for additional supporting documentation such as the last 3 paystubs, a utility bill reflecting his or her current address, and bank records.  Finally, ask a lot of questions and gauge the tenant’s response.

As you can see, despite the increasing trend of identity theft and tax return scams, cautious landlords need not worry.  Just remember to never take anything provided by the tenant at face value – always do your own level of background checking and due diligence, and apply a dash of common sense.  Do this without fail, every time. This is the only way you can be sure to avoid this type of scam.  Good luck!

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