ALTERNATIVE ACCEPTABLE DOCUMENTATION FOR VERIFICATION OF NON-FILING

ED’s Office of Postsecondary Education (OPE) informed schools that the IRS has stopped processing transcripts by mail until further notice. Although IRS Tax Transcripts are available online, some filers have not been able to access their account. As a result, some students may have to submit alternative documentation to complete verification. According to a recent electronic announcement, schools can accept a signed statement certifying that the individual:

• Attempted to obtain the VNF 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 an income tax return for the applicable tax year, and a listing of the sources of any income earned by the individual from work and the amount of income from each source for the applicable tax year; and
• A copy of IRS Form W–2, or an equivalent document, for each source of employment income received by the individual for the applicable tax year. During this period of national emergency, the Department is permitting institutions to accept a copy of a paystub, an employment offer letter, evidence of direct deposit from an employer, or other similar information for verification purposes. In the case of foster care youth, given the unlikelihood that such students would have earned enough to require them to file taxes, we will permit the institution to accept a signed statement from the foster care youth that he or she earned less than the amount that triggers the requirement for taxpayers to file tax returns.

If non-filing was a result of the taxpayer being granted an IRS extension beyond the automatic six-month extension for the tax year, an institution may accept the following:

• A signed statement certifying that the individual
• Attempted to obtain the VNF from the IRS or other tax authorities and was unable to obtain the required documentation; and
• Has not filed an income tax return and list the sources of any income, and the amount of income from each source for the applicable tax year. If self-employed, the signed statement must also include the amount of AGI and U.S. income tax paid for the applicable tax year;
• A copy of the IRS’s approval of an extension beyond the automatic six-month extension for the appropriate tax year; and
• A copy of IRS Form W–2 for each source of employment income received or an equivalent document for the applicable tax year.

In the event a student, parent, or spouse needs to provide a copy of their W2 but is unable to obtain a copy from the IRS, they may either request a duplicate one from the employer who issued the document, or if that’s not possible, may provide a signed statement attesting to their income that includes:
• The amount of income earned from work;
• The source of that income; and
• The reason why the IRS Form W–2, or an equivalent document, is not available in a timely manner.

UPDATES ON VERIFICATION OF NON-FILING AND USE OF PROFESSIONAL JUDGMENT FOR 2020-2021

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.

NEW VERIFICATION QUESTIONS AND ANSWERS

The Office of Postsecondary Education maintains a website containing Q&As that pertain to the Program Integrity final regulations that were published on October 29, 2010. Six years later, they continue to update the Q&A whenever the U.S. Department of Education’s policy folks respond to interesting questions from schools that they feel needs to be released to the FA community. I’ve consolidated the recent updates for you here:

Q – Must an institution complete verification for a selected applicant who is eligible for both subsidized and unsubsidized Title IV student aid when the applicant chooses not to accept the subsidized aid?

A – An applicant who is eligible for subsidized and unsubsidized Title IV student aid may not avoid completing verification by accepting only the unsubsidized Title IV student aid. In such a case, the institution must complete verification for the applicant to be eligible for any Title IV student aid.

However, except for applicants who are in Verification Tracking Group V4 or V5, an institution may, on a case by case documented basis, disburse unsubsidized Title IV aid to only those applicants who are in Verification Tracking Group V1 or V6 if the institution has determined that there will be a delay in the completion of verification. Also refer to Electronic Announcement dated October 31, 2016.

Q – May an institution disburse unsubsidized Title IV student aid, i.e., Direct Unsubsidized Loans and PLUS Loans, prior to completing verification for a selected applicant who is eligible for both subsidized and unsubsidized Title IV student aid?

A – Except for applicants who are in Verification Tracking Group V4 or V5, an institution may, on a case by case documented basis, disburse unsubsidized Title IV aid to only those applicants who are in Verification Tracking Group V1 or V6 if the institution has determined that there will be a delay in the completion of verification. When determining the amount of the unsubsidized aid to be disbursed, the institution must ensure that the subsidized aid the applicant is estimated to receive is considered. After verification is completed, the institution must ensure that both the subsidized assistance and the unsubsidized assistance are adjusted, if necessary.

Q – For verification of nontax filer wages, are institutions required to collect both the W-2(s) from all employers and the signed statement certifying that the individual has not filed and is not required to file an income tax return, listing all income and sources?

A – Yes. For nontax filers, an institution is required to collect a signed statement certifying that the person is not required to file an income tax return and including the sources and amounts of any income earned from work. In addition, copies of an IRS W-2 form for each source of income earned from work must also be collected. The Department’s suggested verification text will assist an institution in accomplishing this. Institutions that do not use the Department’s suggested verification text must collect the documentation necessary to account for all sources of income.

Beginning with the 2017-2018 award year, nontax filers must also provide confirmation of nonfiling as specified in the applicable annual Federal Register notice. A confirmation of nonfiling can be obtained from the IRS using Form 4506-T and checking box 7. If appropriate, a similar confirmation from another taxing authority (e.g., a U.S. territory or a foreign government) is also acceptable.

Q – Must an institution complete verification for students placed in verification groups V4 or V5 who are only eligible for unsubsidized student financial assistance and not subsidized student financial assistance?

A – An institution should complete verification for a student who is only eligible for unsubsidized student financial assistance who was placed in Verification Tracking Groups V4 or V5. Verifying the student’s high school completion status and identity/statement of educational purpose will help ensure that only eligible students receive aid and improve the integrity of the Title IV, HEA programs.

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