Be sure to grab a copy of the 2021-2022 IRS Tax Return and Transcript Matrix.
Although the U.S. Department of Education announced earlier this year that institutions may accept a signed copy of an individual’s tax return for verification the 2021-2022 award year, some students and families may still submit an official IRS Tax Return Transcript to your office for verification. It’s helpful to know which line items from the tax return, the tax transcript, and the FAFSA and ISIR correspond. Click the link below to download a copy.
In other big news, ED quietly released two big updates for the 2020-2021 award year in the 20-21 FSA Handbook Application and Verification Guide.
In the first update, ED provided guidance for when a school can accept a signed statement from a student, spouse or parent to verify that they did not file a Federal Income Tax Return. According to the updated 20-21 Application and Verification Guide, Individuals who can’t get a VNF letter from the IRS (or other tax authority) may instead submit a signed statement as long as the school has no reason to question the student’s or family’s good-faith effort to acquire the letter. Form 4506-T states that most requests are processed within 10 business days, so at least that amount of time should elapse before schools resort to a signed statement. Also, since a VNF must be dated on or after October 1, 2019, the statement cannot be signed and used before then either. (See Chapter 4, P. AVG-98. “Individuals who can’t get a VNF letter.”)
The statement must assert that the person attempted but was unable to get the VNF. For non-tax filers, the statement must also confirm that they have not filed and are not required to file a tax return for the relevant year, and it must list the sources and amounts of income earned from work. For extension filers, the statement must also confirm that they have not yet filed a return for the tax year and must list the sources and amounts of income; if they are self-employed, it must include the amount of AGI and U.S. income tax paid. Note that in both cases—for non-tax filers and extension filers—the other required documentation (e.g., W-2 forms) must still be provided.
In the second update, ED officially rescinded guidance issued in several Dear Colleague Letters related to the Financial Aid Office’s use of Professional Judgment for students and families receiving unemployment benefits. The Department specifically rescinded guidance in GEN-09-04, GEN-0905 and GEN-11-04. In the June 12, 2020 Errata and Updates notice ED says they removed the last sentence on the page “because it referenced outdated guidance”, confirming that ED no longer considers GEN-09-04 and GEN-09-05 to be in effect for the 2020-2021 award year. See FSA HB AVG Chapter 5, Page 125.
We’ve updated the IRS Tax Return and Transcript Matrix that Financial Aid Professionals use to complete FAFSA verification. Although the U.S. Department of Education announced earlier this year that institutions may accept a signed copy of an individual’s tax return for verification this year, some students and families may still submit an official IRS Tax Return Transcript to your office for verification. It’s helpful to know which line items from the tax return, the tax transcript, and the FAFSA and ISIR correspond. Click the link below to download a copy for yourself.
BREAKING NEWS – FSA ANNOUNCES SCHOOLS CAN ACCEPT SIGNED TAX RETURNS FOR VERIFICATION
Federal student Aid just released guidance allowing schools and college financial aid administrators to accept a signed copy of a 2016 or 2017 income tax return in lieu of tax transcript for the 2018-2019 and 2019-2020 award years as applicable. The announcement provides immediate relief to students beleaguered with problems obtaining the official IRS tax return transcript as has been required until now.
Students and parents who did not file and were not required to file a tax return are still required to provide verification of nonfiling from the IRS, but under the new guidance if the individual is unable to obtain verification of nonfiling from the IRS or other tax authorities and, based upon the institution’s determination, it has no reason to question the student’s or family’s good-faith effort to obtain the required documentation the institution may accept:
A signed statement certifying that the individual
Attempted to obtain the verification of nonfiling from the IRS or other tax authorities and was unable to obtain the required documentation; and
Has not filed and is not required to file a 2016 or 2017 income tax return, and a listing of the sources of any 2016 or 2017 income earned by the individual from work and the amount of income from each source; and
A copy of IRS Form W–2, or an equivalent document, for each source of 2016 or 2017 employment income received by the individual.
FSA also released an announcement informing the Financial Aid community that the Central Processing System will be skipping the database match with Selective Service System during the government shutdown.
According to the electronic announcement, FSA states that “during this match bypass, Student Aid Reports (SARs) and Institutional Student Information Records (ISIRs) will display Comment Code 390: “We were unable to verify your eligibility for federal student aid with one or more other federal agencies through computer matching programs. Your school will contact you if additional information is needed.” The CPS will assign a blank value to the Selective Service Match Flag on SARs and ISIRs unless the corrected transaction already has a valid SSS match flag value that the CPS can pull forward to the new transaction. “
When the shutdown is over, CPS will reprocess ISIR records for impacted students. You can read all about it here in this electronic announcement from FSA.
According to a recent announcement from Federal Student Aid (FSA), some FAFSA applicants who attempted to file a correction to their 2018-2019 FAFSA received 2017 tax year data instead of the correct 2016 tax year data. It appears that this glitch affected only a small number of applicants, particularly those who made a correction to their 2018-2019 FAFSA between September 30, 2018, and October 4, 2018, and used the IRS Data Retrieval Tool to transfer their tax information from the IRS to the FAFSA. FSA identified the issue and resolved the problem with the IRS Data Retrieval Tool on October 4th, 2018, so it shouldn’t happen again.
2018-2019 ISIR CORRECTIONS MADE DUE TO TRANSFER OF INCORRECT TAX YEAR DATA FROM IRS
On October 26, 2018, the Central Processing System reprocessed the ISIRs of affected applicants and voided the bad transactions – but they did NOT correct the tax information so ISIR corrections still need to be made. Instead, emails are being sent to affected applicants alerting them to the problem and informing them to go online and make another ISIR correction by transferring the correct 2016 IRS tax information to the FAFSA using the DRT. This issue reportedly impacted a very small number of applicants, but it is important to note that the reprocessed transactions are intended solely to alert impacted applicants and institutions that action is required; the CPS reprocessing did not modify the financial information transferred from the IRS.
Several methods exist for schools to identify records resulting from the October 26 reprocessing:
Reprocessed Institutional Student Information Records (ISIRs) will be sent under the IGSG19OP message class.
SARs and ISIRs will include SAR comment code 172, which states “This SAR was produced because we processed a change to your information based on information reported to us by another agency or because of a processing system change. Review your SAR to see what effect, if any, this change has had on your application, and call 1-800-4-FED-AID (1-800-433-3243) if you have any questions.”
ISIRs produced because of the reprocessing will include a value of “04” for the Reprocessed Reason Code (ISIR field #248).
The FAA Information page in Student Inquiry on the FAA Access to CPS Online Web site will display “04 – Reprocessed for wrong tax year transferred from IRS DRT” for the Reprocessing Code for the transaction resulting from the reprocessing. The Reprocessing Reason Code 04 description will not display in FAA Access to CPS Online until after FSA implements updates to the site in a future release.