New Aid Officer’s Workshop 2018 Verification 2018-2019 New Aid Officer’s Workshop 2018

Agenda 2018-2019 Verification Updates 2018-2019 Verification Groups 2018-2019 DRT Verification Items to be verified

2018-2019 Verification updates DRT is back for 2018-2019! IRS DRT flags. Acceptable documentation for tax information is either DRT or Tax Return Transcripts. Additional requirements for non-filers.

Information to be Verified: V1: Standard Verification Group V4: Custom Verification Group V5: Aggregate Verification Group High School Completion Status Identity/Statement of Educational Purpose 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 Tax Filers and Nontax filers: household size/# in household number in college

2018-2019 DRT Tidbits Parents and students will again be able to utilize the IRS Data Retrieval Tool to transfer 2016 tax information to the FAFSA. But there are changes: The applicants can transfer tax information but will not be able to view that information. The information will only be visible to the schools they select on their FAFSA. IRS Data Field Flags are changing each transferred element will have individual flag Rollovers: Since applicants and parents will be unable to see the information that was transferred from the IRS, it is necessary to make changes to how IRA and pension rollovers are reported in the online FAFSA form. If an amount greater than $0 is transferred from the IRS into the Untaxed Portions of IRA Distributions field or the Untaxed Portions of Pensions field in the FAFSA form, the applicant or parent will be required to answer a new question about whether or not that amount includes a rollover. If the applicant or parent answers “yes,” he/she will be required to provide the amount of the rollover in a new entry field. The system should then subtract the user-reported rollover amount from the amount of the IRA or Pension distribution that was transferred from the IRS.

IRS Request Field Flags IRS Request Flag Value Parent/Student Blank IRS Data Retrieval Tool not available in the application method utilized by the parent/student (i.e., paper FAFSA, EDE or FAA Access) 00 Parent/student was ineligible to use the IRS Data Retrieval Tool and was therefore not presented with the option to use it in FAFSA on the Web 01 Parent/student was presented with the option to use the IRS Data Retrieval Tool in FAFSA on the Web and elected to use it, but did not transfer IRS data into the FAFSA 02 IRS data for the parent/student was transferred from the IRS and was not changed by the user prior to submission of an application or correction 03 IRS data for the parent/student was transferred from the IRS and changed by the user prior to submission of an application or correction 04 IRS data for the parent/student was transferred from the IRS and then changed by the user on a subsequent transaction 05 Parent/student was presented with the option to use the IRS Data Retrieval Tool in FAFSA on the Web, but did not elect to use it 06 IRS data for the parent/student was transferred from the IRS, but a subsequent change made the parent ineligible to use the IRS Data Retrieval Tool 07 IRS data for the parent/student was transferred from the IRS, but the IRS indicated that the parent filed an amended tax return Here is an overview of each of the IRS Request Field flags. Which flag is set when applicant/parent successfully completed DRT?

IRS Flag 06 This existing flag is set when, based on information provided by the applicant or parent on the online FAFSA form, the applicant or parent was eligible to use the IRS DRT and data was transferred from the IRS, but after submission of the FAFSA, a subsequent change made the applicant or parent ineligible to use the IRS DRT. If an institution receives an ISIR with an IRS Request Flag value of 06, it must contact the applicant or parent, as applicable, to determine if the income tax return information that was transferred into the FAFSA form is correct (e.g., does it include information for the correct parties) given the changes the applicant or parent made to IRS DRT eligibility criteria, and make any necessary changes to the applicant’s record. For example, an applicant reported on her FAFSA form that she was married as of 02/2007 and filed a joint tax return. She used the IRS DRT to transfer information from that joint tax return into her FAFSA form. She then subsequently corrects her marital status date to 02/2017 and becomes ineligible to use the IRS DRT. This correction to her marital status date means that she was not really eligible to use the IRS DRT initially, and therefore, the tax return information provided on her FAFSA form is very likely inaccurate. 

IRS Flag 07 Some applicants and parents incorrectly self-identify that they filed an amended tax return, resulting in their being ineligible to use the IRS DRT. In addition, some applicants and parents who filed an amended tax return do not indicate this on their FAFSA form. Therefore, for both applicants and parents, we are removing the filtering question on the FAFSA form related to filing an amended tax return so that, if otherwise eligible, they will be able to use the IRS DRT. There will be a new IRS Request Flag with a value of 07 that indicates that the applicant or parent filed an amended tax return. This flag will be set when the applicant or parent links to the IRS, successfully authenticates, chooses to transfer his/her information into the FAFSA form, and the IRS determines that the tax filer has an amended return on file for the relevant tax year (2016 for the 2018–19 FAFSA). However, the income and tax information that is transferred from the IRS will be from the originally filed tax return and will not include changes that were made on the amended tax return (IRS Form 1040X). If an institution receives an ISIR with an IRS Request Flag value of 07, it must contact the applicant or parent, as applicable, and make any necessary changes to any of the data items, regardless if student is selected for verification or not. IRS Flag 07 is the new IRS Flag H starting in 2018-2019. 2017-2018 will still use flag H. Why is it flag 07 now. Some applicants and parents incorrectly self-identify that they filed an amended tax return, resulting in their being ineligible to use the IRS DRT. In addition, some applicants and parents who filed an amended tax return do not indicate this on their FAFSA form. Therefore, for both applicants and parents, we are removing the filtering question on the FAFSA form related to filing an amended tax return so that, if otherwise eligible, they will be able to use the IRS DRT.

High School Completion High School Diploma Copy of the applicant’s high school diploma A copy of the applicant’s final HS transcript showing date HS diploma was awarded A copy of the “secondary school leaving certificate” for students who completed secondary education in a foreign country an are unable to obtain a copy of their high school diploma or transcript. Homeschooled Transcript or the equivalent, signed by the parent or guardian, that lists the secondary school courses completed by the applicant and documents the successful completion of a secondary school education; or A secondary school completion credential for home school (other than a high school diploma or its recognized equivalent) provided for under state law For High School Completion Status the following documentation is acceptable:

High School Completion Recognized Equivalent of a high school diploma: General Educational Development (GED) Certificate or GED transcript State certificate or transcript received by a student after the student has passed a State- authorized examination that the state recognizes as the equivalent of a high school diploma An academic transcript that indicates the student successfully completed at least a two- year program that is acceptable for full credit toward a bachelor’s degree at any participating institution For a person seeking enrollment in an educational program that leads to at least an associate degree or its equivalent and who excelled academically in high school but did not finish, documentation from the high school that the student excelled academically and documentation from the postsecondary institution that the student has met its written policies for admitting such students. DD Form 214 (When documentation of high school completion is unavailable) *DD Form 214 is the certificate of release or discharge from active duty. And this indicates that the student is a high school graduate or equivalent.

Identity/Statement of Educational Purpose Appear in person and present to an institutionally authorized individual: A valid government-issued photo identification (driver’s license, non-driver’s license, or passport); and A signed statement of educational purpose Must maintain, an annotated copy of the identification submitted by the applicant that includes: The date documentation was received; and The name of the institutionally-authorized individual that obtained the documentation If unable to appear in person, must provide the institution: A copy of a valid government-issued photo identification (driver’s license, non-driver’s license, or passport); and An original notarized statement of educational purpose signed by the applicant Identity & Education Purpose: -Your institution might have it in their policy to have all advisors be institutionally authorized personnel to receive/review the required documentation. -In addition the Dept of Ed provides the exact language needed for the SEP form.

Discrepant Tax data The IFAP handbook states the following regarding Discrepant tax data: We have already stated that financial aid administrators do not need to be tax experts, yet there are some issues that even a layperson with basic tax law information can evaluate. Because conflicting data often involve such information, FAAs must have a fundamental understanding of relevant tax issues that can considerably affect the need analysis. You are obligated to know: whether a person was required to file a tax return, what the correct filing status for a person should be, that an individual cannot be claimed as an exemption by more than one person.

Nontax filers Signed statement certifying- That the individual has not filed and is not required to file a 2016 income tax return The sources of 2016 income earned from work and the amount of income from each source. W-2 forms for each source of 2016 employment income received or an equivalent document Confirmation of non-filing from the IRS or other relevant taxing authority dated on or after October 01, 2017. **For parents of dependent students and independent students.** Nontax filers: Signed statement certifying- That the individual has not filed and is not required to file a 2016 income tax return. The sources of 2016 income earned from work and the amount of income from each source. W-2 forms for each source of 2016 employment income received or an equivalent document **Based on information received we as administrators must determine if an individual would have been required to file a tax return based on IRS Filing thresholds. (See IRS Publication 17) Confirmation of non-filing from the IRS or other relevant taxing authority dated on or after October 01, 2017. -The Verification of non-filing letter that is received only indicates that the IRS did not receive a tax return for that individual for that tax year they are requesting. It DOES NOT indicate that the individual was not required to file.

Auto zero EFC What needs to be verified For Auto Zero EFC students selected for verification? What all needs to be verified if an AutoZero EFC student is selected for verification. -The Program Integrity Questions and Answers under the Verification section addresses in detail the items needing to be verified for AutoZero applicants. It’s question V1-Q9. In addition, if you have access to the NASFAA Training Library this was mentioned in the Verification and Professional Judgement in a PPY World webinar from March 22, 2017. **If verification of these items reveals an applicant should not have qualified for AutoZero EFC then we must verify remaining income information for their selected verification tracking group.

2016 Tax matrix Adjusted Gross Income (AGI) U.S. Income Tax Paid Education Credits IRA Deductions and Payments Tax Exempt Interest Income Untaxed Portions of IRA Distributions Untaxed Portions of Pensions Acceptable documentation to verify tax information is DRT or tax return transcripts.

Practice exercise TAX TIME!

Tax Transcript exercise answers Adjusted Gross Income (AGI) $ U.S. Income Tax Paid Education Credits IRA Deductions and Payments Tax Exempt Interest Income Untaxed Portions of IRA Distributions Untaxed Portions of Pensions Type of Tax Return Filed Tax Filing Status

Reminders Amended Returns Signed copy of 1040X and IRS Tax Return Transcript (with all data elements) $25 Tolerance for dollar and non-dollar amounts Individuals that received an extension of time to file must submit the IRS Verification of Non-filing letter. Cannot accept IRS Verification of Non-filing letter dated before October 01, 2017. IRS Verification of Non-filing Letter does not indicate that an individual was NOT required to file, it only indicates that the IRS did not receive an income tax return for the individual listed on IRS Verification of Non-filing Letter. Must still resolve conflicting information Ex. Comment code 400/401 Per IFAP Handbook.: For students who are selected for verification and receiving subsidized student aid, changes that result to any non-dollar item and to any dollar item of $25 or more must be submitted for processing. See the section on changes to a selected applicant’s FAFSA. Beginning with the 2018–19 FAFSA, because information transferred from the IRS does not display to the applicant or parent (nor can corrections be made), any web edits that include information transferred from the IRS will no longer be presented to the applicant or parent. Instead, new SAR comments will display on the ISIR (and SAR) to alert financial aid administrators that at least one edit was triggered but could not be displayed to the applicant or parent and therefore, could not be resolved online. The comment codes are 400 (for parents) and 401 (for applicants). What triggers 400/401: Student/Parent is a tax filer and the AGI retrieved from the IRS is zero, but the total income earned from work is greater than zero. The total of the Additional Financial Information fields reported on the FAFSA form is greater than the AGI transferred from the IRS. Any item from the FAFSA list of Untaxed Income is equal to or exceeds the AGI transferred from the IRS.

Resources Federal Student Aid Handbook Application and Verification Guide https://ifap.ed.gov/fsahandbook/1718FSAHandbookAVG.html IFAP’s Electronic Announcements, Dear Colleague Letters Changes to IRS Data Retrieval Tool Process for 2018-2019, refer to Electrontric Announcement posted on August 7, 2017. NASFAA Ask Regs Knowledgebase http://askregs.nasfaa.org/ics/support/KBSplash.asp Institutional Policies and Procedures IRS Publication 17: https://www.irs.gov/pub/irs-prior/p17--2016.pdf *Make sure you are reviewing the corresponding Publication year(s) for the tax year in question.

Questions Dennise Mendez Financial Aid Advisor III Texas A&M University dmendez@tamu.edu