1. VERIFICATION and TAX FORMS MAFSAA Fall Conference October 18, 2010

2. Verification Verification concerns applicants for most FSA programs, but it isn’t required if the student will only receive a parent or graduate PLUS loan, an unsubsidized Stafford loan, a TEACH grant, a Stafford loan at a foreign school, or LEAP or SLEAP funds. Yet a student can’t avoid verification by choosing to borrow an unsubsidized loan instead of a subsidized loan. If he tries to do this, the school is to continue with verification. Required Policies Your school must have written policies and procedures on the following verification issues: deadlines for students to submit documentation and consequences of the failure to meet those deadlines, a method of notifying students of award changes due to verification, required correction procedures for students, and standard procedures for referring overpayment cases to the Department. Additionally, the school must give each applicant selected for verification a written statement explaining the following: Documents required for verification. Student responsibilities—including correction procedures, the deadlines for completing any actions required, and the consequences of missing the deadlines. Notification methods—how your school will notify a student if her award changes as a result of verification, and the time frame for such notification. Required Verification Items: 34 CFR 668.56 1. Household size 2. Number in college 3. Adjusted gross income (AGI)4. U.S. taxes paid5. Certain types of untaxed income and benefits: ➔ Child support ➔ IRA/Keogh deductions ➔ Interest on tax-free bonds 6. All other untaxed income included on the U.S. income tax return, excluding information on the schedules

3. Required Policies Your school must have written policies and procedures on the following verification issues: deadlines for students to submit documentation and consequences of the failure to meet those deadlines, a method of notifying students of award changes due to verification, required correction procedures for students, and standard procedures for referring overpayment cases to the Department.

4. Additionally, the school must give each applicant selected for verification a written statement explaining the following: Documents required for verification. Student responsibilities—including correction procedures, the deadlines for completing any actions required, and the consequences of missing the deadlines. Notification methods—how your school will notify a student if her award changes as a result of verification, and the time frame for such notification.

5. Required Verification Items: 34 CFR 668.56 1. Household size 2. Number in college 3. Adjusted gross income (AGI) 4. U.S. taxes paid

6. Required Verification Items: Cont. 5. Certain types of untaxed income and benefits: ➔ Child support ➔ IRA/Keogh deductions ➔ Interest on tax-free bonds 6. All other untaxed income included on the U.S. income tax return, excluding information on the schedules

7. In addition to verifying these required items for CPS-selected students, you can choose to verify any other application items, requiring any reasonable documentation, in accordance with consistently applied institutional policies. You may decide which students must provide documentation for any additional data elements and what constitutes acceptable documentation.

8. A school must verify any application information that it has reason to believe is incorrect [34 CFR 668.54(a)(3)] or discrepant [34 CFR 668.16(f)]. Students with these applications are considered to be selected for verification by the school even though it may not be verifying the same data as for CPS-selected applications.

9. Consistency of information & conflicting information A school must have a system of identifying and resolving discrepancies in all FSA- related information received by any school office. A school must resolve discrepancies for all students, not just those selected for verification. Resolution includes determining what information is correct, and documenting the school’s findings in the student’s file

10. If your school has conflicting information concerning a student’s eligibility or you have any reason to believe a student’s application information is incorrect, you must resolve the discrepancies before disbursing FSA funds. If you discover discrepancies after disbursing FSA funds, you must still reconcile the conflicting information and take appropriate action under the specific program requirements.

11. Discrepant tax data Because conflicting data often involve tax information, FAAs must have a fundamental understanding of tax issues that can affect need analysis. You should know whether an individual is required to file a tax return; an individual’s correct filing status; and only one person can claim another as an exemption. Publication 17 of the IRS, Your Federal Income Tax, is a useful resource for the aid office

12. Reference Materials Federal Student Aid Handbook – Application and Verification Guide and Volume 2 –Chapter 10 Administrative Requirements for the Financial aid office Paper FAFSA Form The EFC FORMULA IRS Publication 17 – Your Federal Income Tax IRS 1040 Instruction booklet IRS 1040A Instruction booklet

13. Most Common Errors-Verification Worksheet Number in Family-Confusion regarding which children to include or not. Number of Children in College- often incorrectly include parent that is in college. Parent or Student who are not required to file tax return, but had earnings often fail to list sources and amounts in section 3.

14. Most Common Errors-Verification Worksheet- Cont. Sources and amounts of other untaxed income not listed. Most common omissions- – Payments to tax deferred pensions and savings plans(paid directly or withheld from earnings) most often shown on W-2 forms Boxes 12a through 12d codes D,E,F,G,H,and S. – $2400 of untaxed Unemployment Compensation

15. Most Common Errors-Verification Worksheet- Cont. Most common omissions- Cont. - Untaxed portion of pensions - Deductible IRA/Keogh Most common incorrect entry. - Inclusion of Untaxed Social Security Benefits

16. Common Discrepancies on Fafsa Invalid Dependency answers, such a legal guardianship, emancipated minor, ward of the court. Indication of eligibility or not for filing 1040a or EZ. Indication of dislocated worker. Student grant and scholarship aid reported to the IRS in your Adjusted Gross income.

17. Common Discrepancies on Fafsa Parents married but only one parent listed and included. Parents unmarried both parent’s listed and information included. Changes due to Corrections, Updates and Adjustments and filing Fafsa Income Tax Paid, not amount withheld, not including other taxes such as self-employment tax

18. Common Discrepancies on Fafsa Untaxed portions of IRA and/or Pension distributions. Divorced parent included instead of Step – parent.