2019-2020 Verification and Changes for 2020-2021 FASFAA Region V - - PowerPoint PPT Presentation

2019-2020 Verification and Changes for 2020-2021

FASFAA Region V Fall Workshop Broward College – A. Hugh Adams Central Campus November 8, 2019

Topics

• Whose application must be verified
• Verification tracking groups and

FAFSA information to be verified

• Acceptable documentation
• Policies and procedures

Verification

• Process of verifying accuracy of Free

Application for Federal Student Aid (FAFSA) data

• Regulations define:

– Whose application must be verified – FAFSA information to be verified – Documentation used to verify data elements

• Regardless of verification selection, must

always resolve discrepancies and conflicting information

Verification Selection Process

• Customized approach
• Data elements selected each award year
• FAFSA information that must be verified:

– Will vary from applicant-to-applicant – May be information that is not used in calculating applicant’s expected family contribution (EFC)

Verification Tracking Groups

• For 2019–20, Central Processing System

(CPS)-selected applicants are assigned to

• ne of three verification tracking groups

(V1, V4, and V5)

• Same data elements as for 2018-19

award year

• Each tracking group determines items to

be verified and required documentation

Tracking Group Reassignment

• Can move from V1 or V4 to V5
• Impacts which aid must be adjusted
• r returned (subsidized and/or

unsubsidized)

• See October 31, 2016 Electronic

Announcement, Changes in Verification Tracking Groups

2019-2020 Verification Tracking Groups

Auto Zero EFC - Dependent

Verify only:

• Parent’s AGI, if tax filers (V1, V5)
• Parent’s income earned from work, if

nontax filers (V1, V5)

• Student’s high school completion

status and identity/Statement of Educational Purpose (V4, V5)

Auto Zero EFC - Independent

Verify only:

• Student’s/spouse’s AGI, if tax filers

(V1, V5)

• Student’s/spouse’s income earned

from work, if nontax filers (V1, V5)

• Number of household members (V1,

V5)

• Student’s high school completion

status and identity/Statement of Educational Purpose (V4, V5)

2019-2020 Verification Documentation Requirements

Verification Documentation

• IRS Data Retrieval Tool (IRS DRT)

data elements already verified if IRS Requested Flag in “02”

• Does not matter what IRS Data Flags

are

• If no “02,” Tax Return Transcript or

acceptable alternative transcript is required

• Extremely limited exceptions exist

IRS DRT Cannot Be Used When...

× Tax return not yet filed × Puerto Rican or foreign (non-U.S.) tax return filed × Taxes filed electronically within last 3 weeks × Taxes filed by mail within last 11 weeks × Parents are unmarried and living together × Change in marital status after end of tax year and before filing FAFSA × Conflict between marital and tax filing status × Married independent student and spouse filed separate tax returns × Married parents filed separate tax returns × Married and filed taxes as head of household × First 3 digits of SSN are “666” × Neither married parent has a valid SSN × Both parents entered all zeros for SSN

Tax Return Transcript

• Can be requested:

– IRS Get Transcript Online – IRS Get Transcript by Mail – 1-800-908-9946 – Mail or fax IRS Form 4506-T or 4506 T-EZ – Income Verification Express Service

Acceptable Alternative IRS Tax Transcripts

• Record of Account Transcript
• Return Transcript for Taxpayer

(RTFTP)

• Tax Return DataBase View (TRDBV)

transcript

• Any other IRS tax transcript that

includes all of the income and tax information required to be verified

• IRS Tax Account Transcript or Information

Returns Processing Transcript Request – Wages (IRPTR-W) alone are not acceptable for federal verification

Acceptable Alternative IRS Tax Transcripts

• Effective beginning with the publication of the

January 9, 2019 Electronic Announcement and applicable to the 2018-2019 FASFA processing and verification cycles and beyond, the institution may accept as acceptable documentation a SIGNED copy of the income tax return for the applicable tax year that the tax filer submitted to the IRS or relevant tax authorities to verify FAFSA/ISIR income and tax return information.

• This includes using a SIGNED income tax

return to complete verification for amended tax filers and victims of identity theft. (see

Federal Register notice published on May 24, 2019)

Redacted Tax Transcripts

• Effective September 2018, IRS began

redacting (hiding) certain personally identifiable information (PII)

• The following information will be provided
• n the new transcript:
• Last 4 digits of any SSN listed on the transcript: XXX-XX-

1234

• Last 4 digits of any EIN listed on the transcript: XX-XXX-

1234

• Last 4 digits of any account or telephone number
• First 4 characters of the last name for any individual
• First 4 characters of a business name
• First 6 characters of the street address, including spaces
• All money amounts, including all data required to complete

verification (AGI, taxes paid, etc.)

Redacted Tax Transcripts

• Can create a 10 – digit Customer File

Number

• Cannot be taxpayer’s SSN
• Could be student ID
• Can be added to 4506-T or 4506T-EZ

when requesting tax transcript

• Will appear on tax transcript to match it to

applicable student, spouse or parent

• Spring 2019 – only mailed to IRS

address of record

• See 10/4/2018 Electronic Announcement

DRT Items

The following items are imported from IRS forms 1040, 1040A and 1040EZ to a student’s FAFSA via the DRT:

• Type of tax return filed
• Filing Status
• Adjusted Gross Income (AGI)
• Taxes paid
• Income earned from work
• Exemptions

In addition, the following are also imported from the 1040 and 1040A forms but not the 1040EZ:

• Education credits
• IRA deductions
• Tax-exempt interest income
• Untaxed IRA distributions
• Untaxed Pensions

V1– Tax Filers

• Adjusted Gross Income
• U.S. Income Tax Paid
• Untaxed Portions of IRA Distributions
• Untaxed Portions of Pensions
• IRA Deductions and Payments
• Tax Exempt Interest Income
• Education Credits

Nontax Filers - Income Earned From Work

U.S. Individuals:

• Statement or verification worksheet;
• Form W–2 from each employer; and
• IRS Verification of Nonfiling Letter (except

dependent student) Foreign Residents:

• Wage and Tax Statement or equivalent
• Statement or verification worksheet; and
• Verification of Nonfiling from tax authority

(except dependent student)

Nontax Filers – Verification

• f Nonfiling
• Based on dependency status
• Only required if selected for verification
• IRS Verification of Nonfiling Letter or other

confirmation of nonfiling from relevant tax authority is required:

• For a dependent student, each parent who did

not file a tax return

• Independent student and spouse if nontax filer
• Not required from dependent student

except when:

• Conflicting information exists
• Tax extension filed

Nontax Filers – Verification

• f Nonfiling
• Don’t request unnecessarily
• Required even no work and zero

income

• Can be requested in only 2 ways:
• IRS Get Transcript Online Tool
• Submitting IRS Form 4506-T (check box 7)

Nontax Filers – Verification

• f Nonfiling

All nonfilers, including dependent students, selected for verification also must provide:

• Signed verification worksheet or written

statement from each nonfiler certifying for the tax year:

• Individual has not filed and is not required to

file a tax return

• Sources and amounts of income earned from

work

• Copy of W-2 or equivalent document for each

source of employment income

Verification of Nonfiling Alternatives

• Any IRS document indicating:
• “no record of return filed”
• “no transcript on file”
• IRS has no record of a tax return for the

tax year

• U.S. residents who are not required

to file tax and do not have and cannot get:

• Social Security Number (SSN)
• Individual Taxpayer Identification Number

(ITIN); or

• Employer Identification Number (EIN)

Verification of Nonfiling Alternatives

• Individuals who are not U.S. citizens
• r residents, including spouses or

parents of dependent students living in other countries

• Refer to:
• Documents Acceptable for Completing

Verification in webinar handout

• AskRegs Knowledgebase Q&A, Are There

Exceptions or Alternatives to Collecting a Verification of Nonfiling Letter?

• No other alternatives exist at this

time

Tax Extensions

• Automatic 6-Month Extension
• Beyond Automatic 6-Month

Extension for:

• Serving in a combat zone or a qualified

hazardous duty area

• Living outside of the U.S.
• Living in a federally declared disaster

area

• Needing an extension to pay U.S. estate
• r generation-skipping transfer taxes
• Other limited reasons

Tax Extensions – Beyond 6 Months

Must provide copies of:

• IRS Form 4868, “Application for Automatic

Extension of Time to File U.S. Individual Tax Return”

• Unexpired IRS approval of extension beyond

automatic 6-month extension

• Verification of nonfiling dated on or after

10/1/18 (even from dependent student)

• W-2s or equivalent documents for each

source of employment income received for tax year

• If self-employed, signed statement certifying

amount of AGI and tax paid for tax year

Tax Extensions – Beyond 6 Months

• Tax filer only needs to provide proof

from IRS that request for tax extension beyond the automatic 6-month extension was filed

• Does not have to indicate tax extension

was approved by the IRS

• Any IRS tax transcript would be

acceptable documentation if:

• Dated after automatic 6-month

extension ends

• Indicates extension request was filed

with IRS

Tax Extensions

• School may choose to require

finalized IRS DRT or tax transcripts after tax return is filed

• If so, school must re-verify student
• May not apply to those called up for

active duty or qualifying National Guard duty during war, military operation or national emergency

• See 10/31/16 Electronic Announcement

Amended Tax Returns

• School notified through IRS DRT
• Not self-reported on FAFSA
• School is not required to ask
• IRS Request Flag is set to “07” if:
• 1040X was filed
• IRS corrected data
• School must follow up on ALL “07”

Flags regardless of verification selection

Amended Tax Returns – 1040X Filed

If 1040X and selected by CPS, verify using:

• Signed copy of 1040X filed with the

IRS and either of the following:

• Signed or unsigned Tax Return Transcript
• r other tax transcript containing all income

and tax information from original tax return;

• r
• Unchanged IRS DRT data on ISIR

Amended Tax Returns – 1040X Filed

• If 1040X and selected by CPS,

verify using:

• Tax Account Transcript in conjunction

with Tax Return Transcript (without 1040X)

• Record of Account Transcript by itself
• Tax Return Transcript will never reflect

amended information

Challenging Verification Issues from AskRegs

IRA, Pension and Annuity Rollovers

• Rollovers are excluded from EFC
• Using IRS DRT:
• If distribution received, tax filer is asked

to enter amount of any rollover

• IRS Requested Flag = “03” and IRS

Data Field Flag = “2”

• Not using IRS DRT
• Tax filer subtracts amount of rollover

before reporting Untaxed Income

• Document amount of rollover with

signed statement or tax transcript

IRA, Pension and Annuity Rollovers

• Verified using:
• Signed written statement from tax filer

indicating IRS –authorized rollover amount; or

• Signed copy of Tax Return Transcript or

alternative tax transcript with word “rollover” handwritten next to the applicable line items

• Cannot use copy of tax return
• ED will not confirm use of 1099R or

5498

Foreign Tax Returns

• Need the tax filer’s foreign tax

transcript if it can be obtained at no cost

• If transcript costs, accept signed copy
• f tax return
• Add converted income and taxes

paid amounts from foreign tax return with corresponding amounts from U.S. tax return

• Report income earned from work

separately

Foreign Tax Returns

When same individual files U.S. tax return and foreign tax return:

• Only use data from U.S. return

when filing FAFSA

• Do not need foreign tax return

transcript/tax return from that individual

• Do not add back income from

foreign tax return

Clarifications

Documenting Identity

Acceptable

• U.S. passport
• Driver’s license
• Non-driver’s

identification

• Other state-issued ID
• Permanent Resident

Card or Resident Alien Card (I-551)

• Certificate of

Naturalization (with recognizable photo)

• Inmate ID from

government facility

Unacceptable

• Government-issued ID

from a foreign country

• Student ID issued by a

state school

• Military ID (federal law

prohibits photocopying military IDs)

• SNAP ID with or

without a picture

Verification After No Longer Enrolled

• Verification not required if:
• Selected after no longer enrolled for

award year (including summer);

• All Title IV aid have been made; and
• Will not re-enrolled later in same award

year

• Any Title IV aid already disbursed

while enrolled and eligible remains intact

• Same applies if student changes

verification tracking groups after no longer enrolled

Failure to Complete Verification

• When student fails to complete

verification, student (not school) is liable to return funds

• see Volume 4, Chapter 3 of FSA Handbook
• Type of funds that must be returned

depends on Verification Tracking Group

• See 10/31/2016 Electronic

Announcement, Changes in Verification Tracking Groups, Charts A and B

Income That Cannot Be Included

• Cannot include resources specifically

excluded from need analysis, such as:

• Federal veteran’s educational benefits
• Military housing/housing allowance
• State foster care or adoption assistance

payments

• Means-tested welfare benefits
• Combat pay
• Foreign income exclusions (IRS Form 2555)
• In-kind support
• Not even using professional judgment

(PJ)

2020-21 Verification and Sample Tax Return

2020-21 Verification

• For 2020–21, Central Processing System

(CPS) - selected applicants are assigned to

• ne of three verification tracking groups (V1,

V4, and V5)

• Same data elements as for 2019-20 award

year

• Federal Register Notice of Information to be

Verified for the 2020-2021 Award Year

• DLC-GEN-19-02: 2020-21 Award Year:

FAFSA Information to be Verified and Acceptable Documentation

• 2020-2021 FAFSA Verification Suggested

Text

• IRS Announces End to Faxing and Third-

Party Mailings of Tax Transcripts

2020-21 Verification

New IRS Tax Forms for 2018 Tax Year

Important Updates for 2020-21

• IRS Forms 1040A and 1040EZ have been

eliminated

• Verifiable items may appear on the

following forms:

• IRS Form 1040
• IRS Schedule 1
• IRS Schedule 2
• IRS Schedule 3
• If the IRS Form 1040 suggests that a

schedule does not exist, all verifiable items found on that schedule should be blank/zero on the FAFSA.

2018 IRS Form 1040

2018 IRS Form 1040

Determining When Schedules are Required

• A Schedule 1 is required when:
• 1. An amount is notated on line 6, OR
• 2. When line 6 and 7 are not equal

Determining When Schedules are Required

• A Schedule 2 is required when:
• The checkbox on line 11 of Form 1040 is

checked

Determining When Schedules are Required

• A Schedule 3 is required when:
• The checkbox on line 12 of IRS Form

1040 is checked

Schedule 1

Schedule 2

• Excess Advance Premium Tax

Credit Repayment

Schedule 3

• Education Credits

2018 Tax Filing Thresholds

2019-2020 Verification Resources

2019-2020 Verification Resources

• March 28, 2018 Federal Register – Free

Application for Federal Student Aid Information to be Verified for the 2019-2020 Award Year

• Dear Colleague Letter GEN-18-03 – 2019-2020

Award Year: FAFSA Information to be Verified and Acceptable Documentation

• June 8, 2018 Electronic Announcement – 2019-

2020 Verification Suggested Text Package

• 2019-2020 Application and Verification Guide
• IRS Announced Updated Tax Transcript Redacting

Sensitive Information

• 2019-2020 ISIR Guide
• ED’s Program Integrity Q&A Website

https://www2.ed.gov/policy/highered/reg/hearulem aking/2009/verification.html

2019-2020 Verification Resources

• NASFAA Tax Transcript Decoder
• NASFAA Tools & Resources
• https://www.nasfaa.org/tools_resources
• AskRegs Knowledgebase

Resources

Verification Policies and Procedures

Must:

• Be written
• Address school options where

flexibility exists

• Be made clear to all students
• Be consistently applied

Contact

Anh T. Do Associate Director of Compliance University of Miami Office of Financial Assistance & Employment Phone: (305) 284-1852 Email: a.do@miami.edu

Questions?