2019-2020 Verification and

Changes for 2020-2021

FASFAA Region V Fall WorkshopBroward College – A. Hugh Adams

Central CampusNovember 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, mustalways 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 one 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 or 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 on 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 transcriptWill 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 ItemsThe 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• ExemptionsIn 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 of 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 of 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 of 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 or 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 or 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

or other tax transcript containing all income and tax information from original tax return; or

- 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

of 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 IdentityAcceptable

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

identification• Other state-issued ID• Permanent Resident

Card or Resident AlienCard (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 one 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, OR2. 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/hearulemaking/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. DoAssociate Director of ComplianceUniversity of MiamiOffice of Financial Assistance & EmploymentPhone: (305) 284-1852Email: a.do@miami.edu

Questions?