Article #22 From the "What If ..." Library on Salary Negotiations

What If ...
They Find Out How Much I'm Making?

I've often been asked whether employers will be able to find out about past salary.  The person is often planning to inflate their past earnings when talking to an employer, and doesn't want to get caught.  As I discuss in my book, the best strategy is not to reveal your past salary or salary expectations.  Sometimes, however, you may encounter an employer who insists (even then, you don't have to comply.  Again, my book discusses this in depth).    

Some people recommend inflating your salary to get a higher offer, but I disagree.  Many times, people can see through it.  Even though the employer may not guess that you are distorting the truth, he or she may well find something bothers them about their conversation with you, even though they can't put their finger on it.  Even if you get away with it, it starts the employment relationship off on a dishonest note.
With that said, an employer may in some circumstances find out.  Generally, employers are reluctant to share much more than dates of employment and your title.  Most will not share salary with another employer.  However, there are companies that belong to a consortium that do share such information with each other. 
Some companies may ask you to sign a statement giving them permission to verify everything on your resume.  If so, you can include a request that they not contact your current employer.  Such a request is usually respected.  For higher level positions, employers may request that you share your tax statements with them.  Complying with their request would obviously expose your deception and torpedo your chances of being hired.  By refusing, you risk being rejected because of your refusal.  They may believe you are deceiving them.

My advice is to keep your salary information to yourself whenever possible, and to tell the truth.