Verification

A Verification Funny “I told a student we needed his Independent Verification Worksheet and his IRS tax form. My front desk person got a laugh when the student called to see if we’d received his Declaration of Independence and his 10-W- 40!”

Federal Verification Topics  Definition and background.  Resolving inconsistencies.  School’s required policies.  Required verification items.  Documentation requirements.

Federal Verification Topics  Finalizing the verification process.  Verification “tolerance.”  Verification blunders.  Some “not so easy” case studies.

Verification Defined  Process of proving the accuracy of information reported on the FAFSA.  Summarized as a review of the base-year income information on FAFSA.

Purpose of Verification  To resolve or correct information mistakenly reported on the FAFSA.  To deter the reporting of false or fraudulent information.  Above all, to assure that eligible applicants receive the correct types and amount of financial assistance.

Verification  30 percent of FAFSAs submitted are selected by the CPS.  School must follow federal procedures to collect and verify necessary documentation.

Verification  Required only for certain applicants.  Schools may verify the application information of any student.  Such students are subject to the same verification requirements as CPS-selected students.  School selection criteria should be applied fairly and consistently.

Verification versus Resolving Inconsistencies  The requirement to resolve conflicting data is separate and distinct from the verification requirements.  School must have system in place to identify and resolve conflicting information.  School cannot disburse aid until discrepancies are resolved.

Tax Knowledge  Who is required to file a tax return.  What is the correct tax filing status.  Person cannot be claimed as a dependent twice.  No assets, but have income from assets.

Required School Policies  Deadlines for documentation submission and consequences of the failure to meet those deadlines.  Method of notifying students of award changes due to verification.  Required correction procedures for students.

Required School Policies  Means of publicizing requirements and procedures.  Standard procedures for referring overpayment cases to U.S. Department of Education.

Written Requirements  Documentation.  Documents and information needed.  Student Responsibilities.  Includes deadlines, consequences of missing deadlines and correction procedures.  Notification Methods.  How the school will notify students of award changes and time frame for such notification.

Five Required Verification Items  Household size.  Number enrolled in college.  Adjusted gross income (AGI).  US income tax paid.  Certain untaxed income and benefits.  Note: School may choose to verify any other items.

Documentation Requirements  Federal Verification Worksheet.  School may use verification worksheet.  Not required - May create your own.  Most schools use federal worksheet.  School may also require other documentation.  Sample worksheets on pages

Household Size  Includes any persons who are dependents of, or who receive more than half of their support from, the head of the student’s household (either the student or the student’s parents).  Documentation: Verification worksheet or signed statement.

Household Size  Cases when verification is not required:  Student’s SAR/ISIR document is received by school within 90 days of the date application was signed.  Verified HH Size Last Year = This Year’s HH Size.

Household Size  Cases when verification is not required:  Dependent student.  Married Parents and HH Size = 3.  Single Parent and HH Size = 2.  Independent student:  Married and HH Size = 2.  Single and HH Size = 1.

Number Enrolled in College  Always include student.  Parents are excluded unless included via professional judgment.  Others may be included if:  Part of the household size.  Attending a post-secondary (Title IV aid-granting) institution at least half-time.  Seeking a degree or credential.

Number Enrolled in College  Documentation: Verification worksheet or signed statement.  Signed statement may be combined with household size statement.  If school doubts enrollment information reported, it should require additional supporting documentation.

Number Enrolled in College  Cases when verification is not required:  Student’s SAR/ISIR is received by school within 90 days of the date application was signed.  Number in College = 1 (only the student).  All members in the household are enrolled at the same institution and the school can verify this with its own records.

AGI and Tax Paid  Most common documentation = signed copy of federal tax return.  Many ways to file taxes.  Using traditional paper forms.  Electronically (e-file).  Tax documents needed for verification vary depending on filing method.

AGI and Tax Paid  If tax returns are unavailable:  Can accept any IRS form that lists tax account information.  IRS Letter  RTFTP - computerized tax return summary by IRS Regional Service Centers.  Other IRS tax account summaries.  Verification requirements for tax-filing extensions.  W-2 forms.  IRS approval of request for tax-filing extension.  Copies of federal tax returns when filed.

AGI and Tax Paid

 Not reported for non-filers.  Must verify income earned from work.  Verification worksheet.  Signed statement certifying non-filing status and sources and amounts of income.  W-2 forms.

AGI and Tax Paid  The Department now requires financial-aid administrators to “have a fundamental understanding of relevant tax issues that can considerably affect the need analysis.”

Untaxed Income and Benefits  Social Security benefits.  Child support.  IRA/Keogh deductions.  Foreign income exclusion.  Earned income credit.  Interest on tax-free bonds.

Untaxed Income and Benefits  Except for child support, can be verified on tax return or alternative tax documents.  Can be reported on the verification worksheet.

Untaxed Income and Benefits  Non-filers should submit verification worksheet or signed statement.  School must verify all other untaxed income on tax returns and W-2s.

Untaxed Income and Benefits  In-kind income that should not be reported on the FAFSA nor verified:  Food stamp program.  Food distribution program.  National school lunch and school breakfast programs.  Commodity supplemental food program.  Special milk program for children.  Rollover pensions.

Untaxed Income and Benefits  In-kind income that should not be reported on the FAFSA nor verified:  Daycare provided by the Social Services Block- Grant programs.  WIA (formerly JTPA) benefits.  Payments and services received from states for foster care or adoption assistance.  Women, Infants and Children (WIC) Program.

Untaxed Income and Benefits  Social Security benefits.  Aid administrator not required to verify unless he/she believes benefits were received and not reported or reported incorrectly.  Documentation from the Social Security Administration.  Signed statement from the student (spouse, parent if applicable).

Untaxed Income and Benefits  Child support received.  Does not have to be verified if equals verified amount from previous year.  School can accept:  Verification worksheet.  Signed statement confirming amount received for all children.  If paid through a government agency, a statement from that agency.

Untaxed Income and Benefits  Child support received.  If school doubts information/ documentation provided.  Options listed.

Untaxed Income and Benefits  Foreign income excluded from US taxation:  Can deduct excessive living expenses or exclude income received from abroad.  Deducted for tax purposes but considered untaxed income for student aid purposes.  Verified using IRS Forms 2555 (line 43) or 2555EZ (line 18).

Untaxed Income and Benefits

Finalizing the Verification Process  May award and disburse aid if verification documentation matches all information reported on the FAFSA.  If verification reveals errors or inconsistencies, corrections usually have to be made, unless “tolerance” is allowed.

Verification Tolerance  Allows for minor application dollar amount errors that do not significantly affect the student’s aid eligibility.  Not allowed for errors in non-dollar items, such as household size.

Verification Tolerance  Limit of $400.  Examples.

Verification Tolerance

Verification Blunders  Failing to resolve conflicting information.  Incomplete or undocumented verification procedures in the FAO’s policy and procedure manual.  Verification not documented or incomplete.  Collecting tax returns up-front and not completing verification.

Verification Blunders  Failing to obtain tax returns from both parents of a dependent student when the parents are married, report dual income information on the application, but file separate tax returns.  Accepting income documentation from the non-custodial parent and spouse to verify the student’s application.

Verification Blunders  Failing to obtain the tax return of an independent student’s spouse.  Accepting a tax return with the preparer’s name and address typed without obtaining a valid signature or stamp.

Verification Case Studies Four “Not So Easy” Cases  1: The Case of the Mysterious HH Size.  2: Diane’s Dilemma --Taxes ‘R Us.  3: The Case of the Wedding Bell Blues.  4: Bill and His “Separated” Mom.

Verification