NASFAA U SELF-STUDY GUIDES VERIFICATION AWARD YEAR ISSUE DATE APRIL 2017 CREDENTIALED TRAINING

Transcription

1 NASFAA U SELF-STUDY GUIDES VERIFICATION AWARD YEAR ISSUE DATE APRIL 2017 CREDENTIALED TRAINING

2 NASFAA U Self-Study Guide Verification Table of Contents Lesson 1: Introduction to Verification... 1 Lesson 2: Changing Applicant Data Lesson 3: Disbursements, Timeframes, and Policies and Procedures Glossary for Verification Feedback Form These training materials are designed for individual use, as well as for in-person instruction during NASFAA U Authorized Events, such as workshops and institutes. The effectiveness of the learning experience depends on utilization of the quizzes, learning activities and reflective exercises provided by National Association of Student Financial Aid Administrators (NASFAA). All rights reserved. NASFAA has prepared this document for use only by personnel, licensees, and members. The information contained herein is protected by copyright. No part of this document may be reproduced, translated, or transmitted in any form or by any means, electronically or mechanically, without prior written permission from NASFAA. NASFAA SHALL NOT BE LIABLE FOR TECHNICAL OR EDITORIAL ERRORS OR OMISSIONS CONTAINED HEREIN; NOR FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM THE FURNISHING, PERFORMANCE, OR USE OF THIS MATERIAL. This publication contains material related to the federal student aid programs under Title IV of the Higher Education Act and/or Title VII or Title VIII of the Public Health Service Act. While we believe that the information contained herein is accurate and factual, this publication has not been reviewed or approved by the U.S. Department of Education, the Department of Health and Human Services, or the Department of the Interior. The Free Application for Federal Student Aid (FAFSA ) is a registered trademark of the U.S. Department of Education. NASFAA reserves the right to revise this document and/or change product features or specifications without advance notice. April 2017 i

3 Lesson 1: Introduction to Verification Learning Objectives After completing this lesson, you will: Understand the principles of verification; Know when verification is required and for which Title IV programs; Know what data elements must be verified; Identify verification tracking groups; and Understand verification documentation requirements for each data element. Key Concepts The key concepts you will learn in this lesson are: Verification definition; Conflicting information; Selection of applications; Institutionally selected applications; Verification exclusions; Exemption of institution; Verification selection process; Verification tracking groups; Required data items for CPS-selected applicants; Specified year: Prior-prior year; Use of prior award year documentation; Introduction to Verification Introduction and Definition Verification is the process used by the institution to check the accuracy of the information the student and, in the case of a dependent student, the student s parents, provided when applying for Title IV federal student aid via the Free Application for Federal Student Aid (FAFSA). Information is verified by obtaining documentation, including in some cases, a signed statement or worksheet attesting to the accuracy of the information. Verification ensures the accuracy of data used to establish eligibility for need-based federal student aid. Verification regulations define: Whose application must be verified; FAFSA information to be verified; and Documentation required to verify data elements. An institution must verify required verification data elements identified on an applicant s Institutional Student Information Record (ISIR) or Student Aid Report (SAR) if the application is selected for verification on the basis of edits specified by the U.S. Department of Education (ED). If the applicant fails to complete verification as required, there are consequences; these are covered in Lesson 3. Throughout this self-study guide, the term SAR encompasses both the SAR and the paper SAR Acknowledgement, unless noted otherwise. In general, applicants who receive funds from any of the following subsidized Title IV aid programs are subject to verification: Federal Pell Grant Program; Federal Supplemental Educational Opportunity Grant (FSEOG) Program; Federal Work-Study (FWS) Program; Federal Perkins Loan Program; and Direct Subsidized Loans awarded under the Federal Direct Student Loan (Direct Loan) Program. In some instances, applicants who receive only unsubsidized Title IV aid are subject to verification. These will be discussed shortly NASFAA Verification: Lesson 1 1

4 IRS Data Retrieval; Alternative tax data documentation; Adjusted gross income for tax filers; U.S. income tax paid for tax filers; Income earned from work for nontax filers; Untaxed income and benefits for tax filers; Household members; Number of household members in college; High school completion status; Identity and Statement of Educational Purpose; Verification of other application information; Financial aid administrators and tax expertise; Tax extensions; Amended tax returns; Separating income on joint tax returns; Internal Revenue Service tax-related identity theft; Inability to obtain a Tax Return Transcript; Foreign and U.S. Territory income; and Verification status codes. Resources for This Lesson Verification Tracking Groups chart Conflicting Information Independent of verification requirements, institutions must also resolve discrepancies and conflicting information. Resolution of conflicting information involves confirming the accuracy of all information related to the student s application throughout the institution that is suspected to be incorrect. Resolution of conflicting information is an aspect of general program administration relating to the institution s administrative capability. All conflicting information must be resolved before disbursing Title IV aid. If Title IV aid is already disbursed before conflicting information is received, and the conflict is not resolved, that aid must be returned by the student (or parent PLUS borrower). There are only two exceptions to this rule. Conflicting information does not need to be resolved if: The student dies during the award year; or The conflicting data is received after the student is no longer enrolled and has no intention of re-enrolling at the school in the future. If the applicant dies during the award year, verification is terminated and no further Title IV disbursements may be made. The student may retain any Title IV aid disbursements already made and any FWS funds already earned; these are not considered overpayments. While the distinction between verification and conflicting information is important, this self-study guide focuses on verification requirements and does not address other conflicting information specified under administrative capability regulations. However, specifically in response to the implementation of the use of prior-prior year (PPY) income data, resolution of certain conflicting information is addressed in Lesson 2. This self-study guide will review: Whose applications must be verified; Verification tracking groups and the corresponding FAFSA information that must be verified; Documents that may be used to verify data elements; Requirements specifically applicable to the FAFSA processing year; Requirements for correcting data that were incorrect when the application was filed; Requirements for updating data elements that were correct when the application was filed, but have changed since that time; Verification status codes; Interim disbursements; Verification timeframes; and The need for institutional verification policies and procedures Verification: Lesson NASFAA

5 Verification IRS Documentation Requests, Uses, and Messaging chart Documents Acceptable for Completing Verification chart Suggested Verification Text Verification Worksheet 2015 Verification Data and Federal Tax Forms Comparison Highlights of IRS Form W-2 Reporting and Verification Status Codes Glossary Icons You will see the following icons in Lesson 1: Key concept Quick quiz Reflection questions Learning activity Helpful hint You will find definitions relevant to the content of this lesson in the Glossary. Selection of Applications Applications can be selected for verification in one of two ways: By the Central Processing System (CPS) during application processing, based on predetermined criteria and/or random selection; or By the institution, based on its own verification policies. For a CPS-selected application, the ISIR will have a Verification Flag set to Y ; this flag will appear in the FAA Information section. A Verification Flag set to N means the application is not selected by the CPS. If an application is not selected during initial processing, but is selected on a subsequent transaction, the subsequent ISIR will have the Verification Flag set to an asterisk. A verification tracking flag will also appear on the ISIR, indicating one of three selection groups which will be discussed shortly. The SAR will have an asterisk near the expected family contribution (EFC) in the upper right hand side of the first page. A comment will appear in the student section of the first page informing the student that he has been selected for verification and that the institution will be requesting verification documents. Institutionally Selected Applications The institution can select additional applications to be verified that were not selected by the CPS. The institution decides which FAFSA information to verify. The institution s selection may be based on student or application characteristics that it feels are error-prone, such as: Estimated tax figures; Family income levels below that which the institution considers necessary for basic subsistence; Large family size or number in college; Completion of certain FAFSA line items; Large discrepancy between family income and assets; and First-year status. Verification Exclusions Although the applicant may be CPS-selected, certain applicants and FAFSA information are excluded from verification as long as the institution does not have conflicting information or reason to believe information is inaccurate. If the institution has 2017 NASFAA Verification: Lesson 1 3

6 conflicting information or reason to believe the information is inaccurate, the verification exclusion does not apply and the institution must verify the application. The reason for the verification exclusion should be documented in the student s file. Exclusion of Entire Application Student and Parent Data. The entire application (student and parent data) is excluded from verification if the applicant: Is eligible only for unsubsidized federal student assistance that is, Direct Unsubsidized Loan, PLUS, Iraq and Afghanistan Service Grant (IASG), and Teacher Education Assistance for College and Higher Education (TEACH) Grant funds and is not selected for verification of high school completion, identity, and Statement of Educational Purpose; Transfers from another institution and completed the verification process at the previous institution, if a letter is obtained from the previous institution stating the: Application was verified, and Transaction number of the verified ISIR; Will not receive Title IV aid for some reason other than failing to complete verification (e.g., being ineligible for Title IV aid and withdrawing without receiving it); Is selected for verification or changes verification tracking groups after ceasing to be enrolled at the institution; or Dies during the award year. While applicants generally are excluded from verification if they are only receiving unsubsidized Title IV aid, verification of high school completion, identity, and Statement of Educational Purpose is required because these are potential student eligibility issues, which always must be resolved if the applicant is selected for verification of these items while still enrolled. If an individual is only eligible for unsubsidized aid and selected for verification tracking group V5, he needs to verify only high school completion, identity, and Statement of Educational Purpose; he does not need to verify any other FAFSA information, including his income, household size, or number in college. If a student is selected for verification or changes verification tracking groups after the student is no longer enrolled, and the school wishes to make a late disbursement, verification still must be completed in order to make the late disbursement. Verification tracking groups are discussed later in this lesson. The consequences of failing to complete verification are covered in Lesson 3. Additionally, a student may not circumvent the verification process by opting not to apply for a subsidized loan and applying only for an unsubsidized loan. If the student is eligible for a subsidized loan, the student must complete the verification process even if he or she is interested in borrowing only the unsubsidized portion of the loan. In other words, if a student is eligible for both subsidized and unsubsidized Title IV aid, he must complete verification in order to be eligible for any Title IV aid. It is important to monitor any new ISIR for a change in the verification tracking group assignment. Exclusion of Applicant s Parental Data Only. Only the parental data of a dependent applicant are excluded from verification if: Both parents die, or the only parent on the FAFSA (usually the custodial parent) dies; Both parents are mentally incapacitated, or the only parent on the FAFSA (usually the custodial parent) is mentally incapacitated; Both parents contact information is unknown and cannot be obtained by the applicant; or Both parents reside in a country other than the U.S. and cannot be contacted by normal means of communication. Given technological advances in communications, the concept of normal means of communication varies based on the country in which the individuals reside; however, it is rare that parents cannot be Verification: Lesson NASFAA

7 reached by normal means of communications. If one parent can be reached, parental information must be verified. If both parents die after the student has applied as a dependent student, the student is required to update her dependency status. In other words, if the parents of a dependent student whose application has been selected for verification die during the award year, the dependent student s parental information is excluded from verification. However, once the student updates her dependency status to independent, the school is required to verify the updated application since it is selected for verification by the CPS. As always, it is important to monitor any new ISIR for a change in the verification tracking group assignment. The rules for updating application data are detailed in Lesson 2. Exclusion of Applicant s Spousal Data Only. Only the independent applicant s spousal data are excluded from verification if the applicant s spouse: Is deceased or mentally incapacitated; Cannot be located because his contact information is unknown and cannot be obtained by the applicant; or Is residing in a country other than the U.S. and cannot be contacted by normal means of communication. Exclusion of Certain Data Elements Only. Certain data elements are excluded from verification, under certain circumstances. They are as follows: The number in the household of a dependent student, if the parents are married and the household size is equal to three, or if the parent is unmarried and the household size is equal to two; or The number in the household of an independent student, if the student is married and the household size is equal to two, or if the student is unmarried and the household size is equal to one. Exemption of the Institution Some institutions are exempt from some or all of the verification requirements. Foreign Institutions. Foreign institutions participating in the Federal Direct Student Loan (Direct Loan) Program and not located in a state are exempt from all of the verification requirements. Section 34 CFR of the Institutional Eligibility regulations defines a state as: a state of the Union, American Samoa, the Commonwealth of Puerto Rico, the District of Columbia, Guam, the Virgin Islands, the Commonwealth of the Northern Mariana Islands, the Republic of the Marshall Islands, the Federated States of Micronesia, and the Republic of Palau. The latter three also are known as the Freely Associated States. Study abroad students, on the other hand, are subject to verification if their home institution is located in a state. A student s home institution is the institution at which the student is enrolled as a regular student for purposes of receiving a degree, certificate, or other recognized educational credential. Quality Assurance Program. Prior to the award year, certain institutions were allowed to participate voluntarily in ED s Quality Assurance (QA) Program. The QA Program allowed institutions to design and establish a comprehensive quality improvement program to increase award accuracy and strengthen the management and delivery of the Title IV programs. Participating institutions were exempt from prescribed verification requirements. Instead, the institution analyzed its verification procedures and set its own verification parameters based on those areas identified as most error prone for its particular student population. Participating institutions were required to reassess and selfcorrect their verification processes on an ongoing basis. Beginning with the award year, former QA institutions must comply with all applicable verification requirements for CPS-selected applicants. Additional information on the QA Program, including an Action Plan for concluding the program, can be found online at html NASFAA Verification: Lesson 1 5

8 Verification Selection Process ED uses a customized approach to CPSselected applications for verification. Each award year, data elements are selected for the verification process and published in the Federal Register. FAFSA information that must be verified: Varies from applicant to applicant; and May be information that is not used in the calculation of the applicant s EFC. Institutions must verify the FAFSA information currently required to be verified, as indicated on each applicant s ISIR. Assessment for verification selection occurs whenever a correction is made to FAFSA information. Because of this, it is possible for an applicant to be selected for verification or assigned to a different verification tracking group on a second or subsequent transaction. An ISIR flagged as a professional judgment correction will not be reassessed or selected for verification. Verification Tracking Groups For the processing year, a CPSselected applicant will be assigned to one of three verification tracking groups. Each tracking group assignment defines which items must be verified and the documentation required. The three verification tracking groups each have a corresponding tracking flag. They are: Standard Verification Tracking Group with verification tracking flag V1; Custom Verification Tracking Group with verification tracking flag V4; and Aggregate Verification Tracking Group with verification tracking flag V5. The Verification Tracking Groups chart on page 47 is a useful quick guide to the verification tracking groups and the data elements contained in each. Prior to , verification tracking flag V2 was used for the Supplemental Nutrition Assistance Program (SNAP) Verification Tracking Group. Prior to , verification tracking flag V3 was used for the Child Support Paid Verification Tracking Group. Prior to , verification tracking flag V6 was used for the Household Resources Verification Tracking Group. Each of these tracking groups has been eliminated and reserved for future use. Starting in , SNAP and child support paid are no longer included as items that must be verified for verification tracking groups V1, V4, or V5, even if that information is reported on the FAFSA. Assessment for verification selection occurs whenever a correction is made to FAFSA information. Standard Verification Tracking Group (V1). Applicants in this group are tax filers and nontax filers. Tax filers must verify: Adjusted gross income (AGI); U.S. income tax paid; Untaxed portions of Individual Retirement Account (IRA) distributions; Untaxed portions of pensions; IRA deductions and payments; Tax-exempt interest income; Education tax credits (American Opportunity Tax Credit and Lifetime Learning Tax Credit); Household size; and Number in college. Nontax filers must verify: Income earned from work; Household size; and Number in college Verification: Lesson NASFAA

9 Custom Verification Tracking Group (V4). Applicants in this group must verify: High school completion status; and Identity and Statement of Educational Purpose. Aggregate Verification Tracking Group (V5). Applicants in this group must verify: The Standard Verification Tracking Group items based on tax filer or nontax filer status; High school completion status; and Identity and Statement of Educational Purpose. Reassignment of Verification Tracking Groups. Beginning in , applicants may be moved from a previously assigned verification tracking group to verification tracking group V5. The change occurs when the applicant s FAFSA is updated or when other information becomes available to ED. In these instances, the student is only required to verify the FAFSA information in the new verification tracking group (V5) that was not verified in the prior tracking group to which the student was initially assigned. If verification was not completed for the previously assigned tracking group prior to the student being assigned to verification tracking group V5, the student only has to verify the FAFSA information required for tracking group V5. As noted earlier, a student eligible for only unsubsidized Title IV aid and selected for tracking group V5 is only required to verify high school completion, identity, and Statement of Educational Purpose. Additional guidance for actions required as a result of the verification tracking group reassignment is discussed in Lesson 3. Automatic-Zero Expected Family Contribution Qualifiers. Regardless of verification tracking group assignment, applicants who qualify for the Automatic-Zero EFC (Auto-Zero EFC) are required to verify only certain data elements within the tracking group. The information that must be verified varies slightly between dependent and independent applicants. For dependent applicants, only the following FAFSA information must be verified: The parents' AGI, if they were tax filers; and The parents' income earned from work, if they were nontax filers. For independent applicants, only the following FAFSA information must be verified: The applicant's and spouse's AGI, if they were tax filers; The applicant's and spouse's income earned from work, if they were nontax filers; and The number of household members to determine whether the independent applicant has any dependents other than a spouse. Skip-logic used during the FAFSA application process allows applicants who qualify for the Auto- Zero EFC to skip most of the income and all of the asset questions. The above items are verified to determine whether the applicant still qualifies for the Auto-Zero EFC. If verification reveals the applicant should not automatically qualify for a zero EFC, the financial aid administrator must update the FAFSA or ISIR, and verify the remaining data elements within the applicable tracking group. Applicants who qualify for the Simplified Needs Test (SNT) EFC calculation formula are required to verify all data elements required for the verification tracking group in which they are placed. For more information on the Auto-Zero EFC and SNT EFC calculations, refer to Chapter 3 in the Application and Verification Guide of the FSA Handbook. In addition to the FAFSA/ISIR information listed above, dependent and independent applicants placed in verification tracking group V5 also must verify high school completion, identity, and Statement of Educational Purpose NASFAA Verification: Lesson 1 7

10 Quick Quiz 1 Now it s time to check what you have learned so far. Answer the following questions and check your responses using the Answer Key on page Except for high school completion, identity, and Statement of Educational Purpose, which of the following Title IV aid programs are excluded from federal verification requirements? (check all that apply) Federal Pell Grants Iraq and Afghanistan Service Grants Teacher Education Assistance for College and Higher Education Grants Federal Supplemental Educational Opportunity Grants Federal Work-Study 2. For each of the following federally required verification data elements, indicate to which verification tracking group it belongs. Some data elements may apply to multiple groups. V1 Standard Verification Tracking Group V4 Custom Verification Tracking Group V5 Aggregate Verification Tracking Group Verification Data Element U.S. income taxes paid Untaxed portions of Individual Retirement Account distributions Income earned from work Adjusted gross income IRA deductions and payments Statement of Educational Purpose Household size Verification Tracking Group(s) to Which It Belongs (V1, V4, and/or V5) 3. What is the key difference between verification and conflicting information? Verification: Lesson NASFAA

11 Quick Quiz 1 (cont d) 4. Residents of the Northern Mariana Islands and the Federated States of Micronesia are exempt from verification. True False 5. For each of the following federally required verification data elements, indicate to which verification tracking group it belongs. Some data elements may apply to multiple groups. V1 Standard Verification Tracking Group V4 Custom Verification Tracking Group V5 Aggregate Verification Tracking Group Verification Data Element High school completion status Number in college Untaxed portions of pensions Education tax credits Tax-exempt interest income Identity Verification Tracking Group(s) to Which It Belongs (V1, V4, and/or V5) 6. The student s entire application is excluded from verification of income information if the student is eligible only for student assistance, such as,, or funds. (fill in the blanks) 7. The parental data of a dependent student applicant are excluded from verification under which of the following circumstances? (check all that apply) At least one of the parents is mentally incapacitated Both parents contact information is unknown and cannot be obtained by the applicant Both parents reside in a foreign country and cannot be contacted by normal means of communication Both parents are mentally incapacitated Both parents are deceased and the student is adopted 2017 NASFAA Verification: Lesson 1 9

12 Quick Quiz 1 (cont d) 8. If both parents die after the student has applied as a dependent student, the student is required to update his dependency status. True False 9. Which of the following data elements are excluded from verification under certain circumstances? (check all that apply) High school completion status, if the student self-certified it on the FAFSA Number in the independent student s household, if the student is married and the household size is two Number in the dependent student s parent s household, if the parent is unmarried and the household size is two 10. Except for high school completion, identity, and Statement of Educational Purpose, which of the following Title IV aid programs are excluded from federal verification requirements? (check all that apply) Federal Perkins Loans Direct Subsidized Loans Direct Unsubsidized Loans Direct PLUS for parents Direct PLUS for graduate and professional students 11. The independent student applicant s spousal data are excluded from verification under which of the following circumstances? (check all that apply) The spouse is deceased The spouse is mentally incapacitated The spouse cannot be located because his or her contact information is unknown and cannot be obtained by the applicant The spouse has applied for Title IV aid at another school and is only eligible for unsubsidized student assistance The spouse resides in a foreign country and can be contacted by normal means of communication 12. Which of the following are exempt from verification requirements? (check all that apply) Foreign institutions not located in a state Study abroad students whose home institutions are located in a state Federally required verification data elements at institutions participating in the campus-based programs Graduate and professional students Verification: Lesson NASFAA

13 Reflection Questions Locate a copy of your school s verification policies and procedures, and answer the following questions. There are no right or wrong answers. Interview staff from your office as necessary. 1. Is ED s customized approach to verification appropriate, or should all students who are selected for verification be required to verify all of the same data elements? Please explain why you feel this way. 2. Does your institution verify data elements beyond those which are selected by the CPS? Yes No If so, list each data element below and explain why the institution selects it? What research does the institution do to justify the selection of each additional data element? Are there valid reasons for the selection? Why or why not? Data Element: Rationale? 2017 NASFAA Verification: Lesson 1 11

14 Reflection Questions (cont d) 3. Should your institution be selecting additional data elements (such as dependency status, assets, other real estate and investments, etc.) for verification? If so, list each data element and explain why you feel this way. Data Element: Rationale? 4. For , ED eliminated federal verification of other untaxed income, indicating that historical data revealed no significant changes in expected family contributions (EFCs) as a result of verifying untaxed income. Do you agree? Why or why not? Do you have institutional data that conflict with ED s findings? Verification: Lesson NASFAA

15 Required Data Items for CPS-Selected Applicants Each year, ED publishes a notice in the Federal Register detailing the FAFSA information subject to verification that must be verified for CPS-selected applicants, as well as outlining the documentation requirements associated with each data element selected. A school must verify the following FAFSA information for the award year, if that data element is selected for verification by the CPS and included in one of the verification tracking groups discussed earlier: AGI (for tax filers); Income earned from work (for nontax filers); U.S. income tax paid (for tax filers); Untaxed portions of IRA distributions (for tax filers); IRA deductions and payments (for tax filers); Untaxed portions of pensions (for tax filers); Tax-exempt interest (for tax filers); Education tax credits (American Opportunity Tax Credit and Lifetime Learning Tax Credit for tax filers); Household size; Number in college; High school completion; and Identity and Statement of Educational Purpose. Remember, a student eligible only for unsubsidized Title IV aid and selected for tracking group V5 is required to verify only high school completion, identity, and Statement of Educational Purpose. The data elements subject to verification for the award year were published in the April 1, 2016 Federal Register, which is available on ED s Information for Financial Aid Professionals (IFAP) website at General Documentation Requirements A person who is required to report FAFSA information and will file a tax return, but had not yet filed a tax return at the time of application, should have included estimated AGI and other tax data on the FAFSA. However, if selected for verification, all necessary tax return(s) must be filed, and the resulting tax data documentation must be used to complete verification. Specified Year: Prior-Prior Year Data are reported on the FAFSA and verified for the specified year (or base year). Under Section 480(a) of the Higher Education Act of 1965 (HEA), as amended, the specified year can be either: The calendar year that immediately precedes the first year in the award year covered by the FAFSA (prior year); or The year prior to that year, known as the priorprior year (PPY). Through the end of the award year, prior year data had been used to complete the FAFSA. In an effort to simplify and expedite the application process, beginning with the award year, PPY data is used to complete the FAFSA. This means the specified year for the award year is 2015 the same year that was used as specified year data for the award year. Use of Prior Award Year Documentation The use of PPY results in using the same calendar year income for two award years. To help reduce the burden on schools when collecting documentation for verification, ED guidance in GEN states that certain documentation that was used for verification for the award year may be used to satisfy a verification requirement, if the documentation meets the acceptable documentation requirements for Documentation that was collected for may be used to complete verification of the following data: AGI (for tax filers); 2017 NASFAA Verification: Lesson 1 13

16 Income earned from work (for nontax filers); U.S. income tax paid (for tax filers); Untaxed portions of IRA distributions (for tax filers); IRA deductions and payments (for tax filers); Untaxed portions of pensions (for tax filers); Tax-exempt interest (for tax filers); and Education tax credits (for tax filers). The above items (except income earned from work) are considered to be verified in for a tax filer who used the Internal Revenue Service Data Retrieval Tool in , as long as the IRS Request Flag was 02 on the ISIR, indicating the tax data was pulled in from the IRS and was not subsequently modified by the applicant. The institution may rely on that data for verification if, for some reason, the applicant either chose not to or was unable to use the Data Retrieval Tool when completing the FAFSA. Unlike tax data, certain data must be verified in every award for which the applicant is selected and assigned to the applicable verification tracking group. These data include: Household size; Number in college; and Identity and Statement of Educational Purpose. If the institution verified high school completion in a previous award year, it may use the same documentation for each subsequent award year. Tax Data Documentation Internal Revenue Service Data Retrieval Tool (IRS DRT). The IRS Data Retrieval Tool is the principal source of documentation for most financial information subject to verification provided by the applicant on the FAFSA. Unaltered tax information obtained by applicants through the IRS Data Retrieval Tool as part of completing FAFSA on the Web (FOTW) is equivalent to a Tax Return Transcript from the IRS. The following items are transferred from IRS forms 1040, 1040A, and 1040EZ to the FAFSA using the IRS Data Retrieval Tool: Type of tax return filed; Tax filing status; Number of exemptions claimed; AGI; Income earned from work; and U.S. income tax paid. The following items also are transferred from IRS forms 1040 and 1040A (not 1040EZ) to the FAFSA using the IRS Data Retrieval Tool: Untaxed portions of IRA distributions; IRA deductions and payments; Untaxed portions of pensions; Tax-exempt interest; and Education tax credits. The IRS Request Flag on the student s ISIR is used to determine if an applicant was eligible for the IRS Data Retrieval Tool process, if data was retrieved from the IRS, and if the data from the IRS was subsequently modified by the applicant. An IRS Request Flag of 02 indicates there is unaltered tax data. It indicates IRS data was retrieved from the IRS using the IRS Data Retrieval Tool and that data was not subsequently modified by the applicant. All other IRS Request Flag values indicate that tax documentation must be collected to complete verification for the student and his parent or spouse, as applicable. For more information about the IRS Request Flags and what they mean, refer to The ISIR Guide for , available on the FSA Download website at There are certain situations in which the student or parent is not presented with the option to use the IRS Data Retrieval Tool when completing FOTW. Applicants and parents of dependent students are unable to use the IRS Data Retrieval Tool under the following circumstances: The applicant or parents indicated on the FAFSA that the tax return had not yet been filed; Verification: Lesson NASFAA

17 The applicant or parents filed an amended tax return; The applicant or parents filed a Puerto Rican or foreign (non-u.s.) tax return; The applicant or parents filed taxes electronically within the 3 weeks prior to filing the FAFSA; The applicant or parents filed taxes by mail within 11 weeks prior to filing the FAFSA; The applicant s parents are unmarried but living together; The applicant or parent had a change in marital status after the end of the tax year (January 1 or later) and before filing the FAFSA; The married independent applicant and spouse filed separate tax returns; The married parents of a dependent student filed separate tax returns; The applicant or parent is married and filed taxes as head of household; The first three digits of the Social Security Number are 666, indicating the individual is from the Republic of the Marshall Islands, Federated States of Micronesia, or Republic of Palau (i.e., Freely Associated States); Neither married parent entered a valid Social Security Number; or An unmarried parent, or both married parents, entered all zeroes for the Social Security Number. If any or all of these conditions apply to a student or parent, the option to use IRS DRT is not presented. Tax Return Transcript. Applicants who do not, or cannot, use the IRS Data Retrieval Tool must submit an IRS Tax Return Transcript or alternative tax transcript obtained from the IRS to verify tax data for the specified tax year (for example, 2015 for the and processing years). Also, applicants who use IRS Data Retrieval and subsequently change any of the tax-related data elements must submit an IRS Tax Return Transcript or alternative tax transcript to complete verification. To request a copy of an IRS transcript, the tax filer may: Use the Get Transcript Online option on the IRS website to view, print, or download a copy in real time as a Portable Document Format (PDF) file, which may be submitted electronically to the school or printed as a hard copy; Use the Get Transcript by Mail option on the IRS website to submit a transcript request online and receive a transcript by mail; Call ; Mail or fax a paper request IRS Form 4506-T (Request for Transcript of Tax Return) or 4506T- EZ (Short Form Request for Individual Tax Return Transcript), both available on the IRS website; or Obtain an IRS transcript from an Income Verification Express Service (IVES) participant (which is not considered a third-party servicer in this instance) for verification as long as they have no reason to question its authenticity. The IRS allows only certain individuals to use the IRS Get Transcript Online service. Additional information is required to verify the individual s identify, including the: Name; Exact address used when filing the income tax return; Social Security Number; Tax filing status; and Mortgage or home equity loan account number, home equity line of credit account number, auto loan account number, or credit (not debit) card account number. If the individual does not have all of this information and is unable to obtain the tax transcript online, or is otherwise unsuccessful in the online request, she must request the tax transcript using one of the other methods listed. The IRS Get Transcript service is available online at An individual can no longer use the IRS2Go mobile app, or request a copy of a tax 2017 NASFAA Verification: Lesson 1 15

18 transcript or tax return in an IRS field office. For additional ED guidance on requesting tax transcripts, please see the February 23, 2017 Electronic Announcement, Verification IRS Documentation Requests, Uses, and Messaging. Its attachment appears on page 48 of this lesson. See also Appendix D of the November 18, 2015 Electronic Announcement, Timeline Availability of 2015 IRS Tax Information for the FAFSA on the Web s IRS Data Retrieval Tool (IRS-DRT) and for Requesting IRS Tax Return Transcripts. Alternative Tax Transcripts. There are acceptable alternatives to the Tax Return Transcript. These include the: IRS Record of Account Transcript; Return Transcript for Taxpayer (RTFTP); and Tax Return DataBase View (TRDBV) transcript. The IRS Data Retrieval Tool is the principal source of documentation for most financial information subject to verification provided by the applicant on the FAFSA. In fact, an institution may accept as verification documentation any IRS tax transcript that includes all of the income and tax information required to be verified (AGI, U.S. income tax paid, untaxed portions of IRA distributions, untaxed portions of pensions, IRA deductions and payments, taxexempt interest, and education tax credits). Because the IRS Record of Account Transcript, RTFTP, and TRDBV include all of these data elements, either document may be used to meet the verification requirements. However, because the Information Returns Processing Transcript Request- Wages (IRPTR-W) only provides wage information, it does not satisfy the verification requirements. It is also important to note that an IRS Tax Account Transcript, IRS Tax Return Transcript, and IRS Record of Account Transcript are three separate and different documents. According to ED, an IRS Tax Account Transcript alone is not acceptable documentation for completing verification if the applicant is federally selected for verification by the CPS, whether or not an amended tax return is involved. Unlike the IRS Tax Return Transcript and the IRS Record of Account Transcript, the IRS Tax Account Transcript does not include many of the income and tax data required to be verified. The Tax Account Transcript can be used in conjunction with a Tax Return Transcript and IRS Form 1040X to complete verification when an amended tax return is filed, as discussed later. If the tax transcript does not contain all information needed to complete verification, the institution must request additional documentation. A good source of information on individual U.S. tax returns is IRS Publication 17, Your Federal Income Tax for Individuals, which is available for free. It is an excellent resource for the more esoteric returns received in a financial aid office. You may obtain this publication via the IRS website at Alternative Tax Data Documentation There are extremely limited circumstances in which an institution may accept alternative tax documentation besides IRS Data Retrieval and the tax transcripts previously discussed. These circumstances are limited to: Tax return filing extensions; Amended tax returns; IRS tax-related identity theft; Inability to obtain a Tax Return Transcript following the period after which the IRS processes income tax returns for the tax year; Tax account information cannot be located by the IRS, a U.S. territory or commonwealth, or foreign central government; and Foreign and U.S. Territory tax returns Verification: Lesson NASFAA

19 These alternatives are discussed in greater detail later in this lesson under Special Tax Data Considerations. And finally, under the Higher Education Relief Opportunities for Students (HEROES) Act of 2003, the institution may accept in lieu of an income tax return a: Statement from the individual certifying that she has not filed and was not required to file an income tax return or a request for a filing extension because she was called up for active duty or for qualifying National Guard duty during a war or other military operation or national emergency; and Copy of each W-2 received for the specified year, or for a self-employed individual, a statement signed by the individual certifying the amount of AGI for the specified year. The most recent update to the HEROES Act authorized its provisions through September 30, See the Federal Register dated September 27, 2012, pages to 59318, for additional details and a list of the eligible students. Verification Worksheets ED does not develop verification worksheets for schools to use. Instead, ED has developed suggested text for schools to use when developing institutional verification worksheets to collect the required documentation. Use of ED s suggested text is optional. Institutions may develop and use their own or someone else s text, forms, documents, statements, and certifications that are specific to the required verification items. The one exception is that schools must use the exact language provided in the Statement of Educational Purpose. ED s Suggested Verification Text may be found starting on page 64 and in the July 29, 2016 Electronic Announcement. This includes the required text for the Statement of Educational Purpose. NASFAA provides a master verification worksheet schools may choose to use, rather than recreating their own. This sample worksheet starts on page 78. Acceptable Signature Formats Signatures on all verification documents are acceptable in the following formats: Wet (in other words, a handwritten original signature); Photocopied; Faxed; and Electronic, such as the use of a Personal Identification Number (PIN) to sign an electronic document, which identifies and authenticates a particular person as the source of the signature. Electronic Documentation In general, institutions may use electronic records and signatures for any provision in the regulations that requires institutions to provide or make available written information to a student or parent, or requires a student or parent to authorize, certify, or sign a document. This includes obtaining signatures on documents such as verification worksheets and other types of verification documentation. Institutions that wish to use electronic records and signatures must comply with ED s Standards for Electronic Signatures in Electronic Student Loan Transactions. While the title implies that this guidance applies only to student loan transactions, these standards apply to all other areas wherein institutions choose to use electronic records and signatures. ED s Standards for Electronic Signatures in Electronic Student Loan Transactions are outlined in GEN-01-06, which may be found on IFAP. Institutions must electronically obtain the consent or confirmation of consent from the student and parent, if applicable, and provide the following information to the student and/or parent: The scope of the consent; The hardware and software requirements for conducting electronic transactions and retaining electronic records covered under the scope of the consent; How the student and/or parent can request and obtain paper copies of electronic records; 2017 NASFAA Verification: Lesson 1 17

20 Any right or option the student has to conduct the transactions in a non-electronic form or via paper; The right of the student or parent to withdraw consent, as well as the procedures for doing so; and The consequences of withdrawing consent. Institutions that wish to use electronic records and signatures must have an electronic process that issues an identity credential such as a password or PIN to the student, and the process must also authenticate and use the credential issued to establish an electronic signature and conduct the transaction(s) electronically. The institution s electronic process must also have standards for ensuring the: Accuracy; Integrity; and Accessibility of all electronic records. All electronic records must be: Authentic; Reliable; Usable (able to be located, retrieved, presented, and interpreted); Complete; and Accessible to ED, or other parties who are entitled access, in a form that can be accurately reproduced for the time period that the record must be retained. Student s spouse, if married; and Student s parents(s) and/or stepparent, for dependent students. If the student, spouse, parent(s), or stepparent filed or was required to file a tax return, AGI is verified and income earned from work is not verified. Documentation AGI must be verified using one of the following two methods: Unaltered information obtained through the IRS Data Retrieval Tool; or An IRS Tax Return Transcript or an alternative tax transcript listing tax account information. Both of these alternatives were discussed earlier under Tax Data Documentation. See the 2015 Verification Data and Federal Tax Forms Comparison on page 86 for a side-by-side comparison of required tax data elements and the applicable line items on the IRS tax returns and Tax Return Transcript. Tax Return Transcript 1040 Adjusted Gross Income Adjusted Gross Income Per Computer (Transcripts 1040, 1040A, and 1040EZ) Line 37 General Title IV recordkeeping and electronic documentation requirements may be found in Volume 2 of the FSA Handbook, also available on IFAP. Adjusted Gross Income for Tax Filers If an income tax return was filed or was required to be filed, the institution must verify specified-year (for example, 2015) AGI for the: Student; 1040A 1040EZ FAFSA Line 21 Line 4 Student Question 36 Parent Question Verification: Lesson NASFAA

21 Signature Requirements. The student, spouse, and/or parent signatures are not required when unaltered IRS Data Retrieval Tool data is used. A respective student, spouse, or parent signature on the tax transcript is encouraged but not required, even if it is delivered to the financial aid office by the student instead of the IRS. If the tax transcript is sent directly from the IRS to the school, there is no need to seek a student, spouse, or parent signature on it. AGI Documentation Exceptions. In rare and exceptional circumstances, alternative documentation may be used to verify AGI. These circumstances are discussed later under Special Tax Data Considerations, and they include: Tax return filing extensions; Amended tax returns; IRS tax-related identity theft; Inability to obtain a Tax Return Transcript following the period after which the IRS processes income tax returns for the tax year; Tax account information cannot be located by the IRS, a U.S. territory or commonwealth, or foreign central government; and Foreign and U.S. territory tax returns. For more on verifying AGI under these circumstances, see Special Tax Data Considerations later in the lesson. U.S. Income Tax Paid for Tax Filers Student; If an income tax return was filed or was required to be filed, the institution must verify U.S. income taxes paid for the: Student s spouse, if married; and Student s parents(s) and/or stepparent, for dependent students. If the student, spouse, parent(s), or stepparent did not file, and was not required to file, a U.S. tax return, verification of taxes paid is not required. Documentation As with AGI, taxes paid must be verified using one of the following two methods, as discussed earlier under Tax Data Documentation: Unaltered information obtained through IRS Data Retrieval Tool; or An IRS Tax Return Transcript or an alternative tax transcript listing tax account information. See the 2015 Verification Data and Federal Tax Forms Comparison on page 86 for a side-by-side comparison of required tax data elements and the applicable line items on the IRS tax returns and Tax Return Transcript. Tax Return Transcript A 1040EZ FAFSA U.S. Income Tax Paid 1040 Transcript Income Tax After Credits Per Computer minus Excess Advance Premium Tax Credit Repayment Amount 1040A Transcript Tentative Tax Per Computer minus Total Credits Per Computer 1040EZ Transcript Total Tax Liability TP Figures Per Computer minus Health Care: Individual Responsibility Line 56 minus Line 46 Line 28 minus Line 36 Line 10 Student Question 37 Parent Question 86 Signature Requirements. The student, spouse, and/or parent signatures are not required when unaltered IRS Data Retrieval Tool data is used. A respective student, spouse, or parent signature on the tax transcript is encouraged but not required, even if it is delivered to the financial aid office by the student instead of the IRS. If the tax transcript is sent directly from the IRS to the school, it does not need a student, spouse, or parent signature on it NASFAA Verification: Lesson 1 19

22 Taxes Paid Documentation Exceptions. In rare and exceptional circumstances, alternative documentation may be used to verify taxes paid. These circumstances are discussed later under Special Tax Data Considerations, and they include: Tax return filing extensions; Amended tax returns; IRS tax-related identity theft; Inability to obtain a Tax Return Transcript following the period after which the IRS processes income tax returns for the tax year; Tax account information cannot be located by the IRS, a U.S. territory or commonwealth, or foreign central government; and Foreign and U.S. Territory tax returns. For more on verifying taxes paid under these circumstances, see Special Tax Data Considerations later in the lesson. Income Earned from Work for Nontax Filers for the: Student; If an income tax return was not filed and was not required to be filed under IRS or any other applicable government agency rules, income earned from work is verified Student s spouse, if married; and Student s parents(s) and/or stepparent, for dependent students. If the student, spouse, parent(s), or stepparent filed or was required to file a tax return, AGI is verified instead of income earned from work. Documentation Income earned from work must be verified using a statement or verification worksheet signed by the individual certifying: That the individual has not filed and is not required to file a tax return for the 2015 tax year; Each source of income earned from work for the 2015 tax year; and The amount of income earned from each source for the 2015 tax year. The individual must also provide a copy of an IRS Form W-2 for each source of employment income for the 2015 tax year. In instances where an individual is required to provide a copy of a W-2, but did not save their copy, the individual should request a replacement copy from the employer who issued the original W-2. If the individual is then unable to obtain and submit a W-2 in timely manner, the school may accept a statement signed by taxpayer certifying the following for the tax year: Amount of income earned from work; Source of the income; and Reason why a W-2 is unavailable in a timely manner. An IRS Wage and Income Transcript also can be used in lieu of a W-2 form to verify wages and income. Lastly, the school must require the individual to submit an IRS Verification of Nonfiling Letter dated on or after October 1, The individual can request a Verification of Nonfiling Letter using the IRS Get Transcript Online tool, or by submitting IRS Form 4506-T and checking box 7. This letter only indicates that the individual has not filed a tax return; it does not indicate whether or not the individual was required to file a tax return. The Verification of Nonfiling Letter is not available for request using the toll-free phone number or the IRS Get Transcript by Mail service online. The IRS Verification of Nonfiling Letter is required anytime a student, parent, or spouse nontax filer is living in the U.S. and subject to verification under verification tracking group V1 or V5. This includes any individual who is subject to verification and who did not file taxes, regardless of the amount of income (even zero). For example, if a dependent student is selected for verification and the student and both parents on the FAFSA did not file taxes, then the student and both parents will each need to provide an IRS Verification of Nonfiling Letter in other words, three nonfiling letters would be required to complete verification Verification: Lesson NASFAA

23 Verification of Nonfiling Letter Alternatives. In some cases, an individual will not receive an IRS Verification of Nonfiling Letter, even after requesting one from the IRS. This is okay. Any IRS document is acceptable as a verification of nonfiling letter if it clearly indicates that the IRS does not have a tax return record from the individual for the tax year being verified. Such documents can include, but are not limited to: An IRS Tax Return Transcript or Tax Account Transcript with a message indicating no record of return filed or no transcript on file for the individual for the tax year; or IRS Form clearly stating that the form is provided as verification of nonfiling, or stating that the IRS has no record of a tax return for the individual for the tax year. There are different versions of IRS Form 13873, including the: V, RAIVS Requests for Verification of Non-Filing of Taxpayer Accounts; and T, RAIVS Requests for Tax Information Documents or Transcripts of Tax Accounts. Any version of IRS Form is acceptable, as long as it contains a clear indication that it is provided as a verification of nonfiling or that the IRS has no record of a tax return for the tax year. If the individual did not properly or accurately complete his request for an IRS Verification of Nonfiling Letter or other IRS document, Form may be used by the IRS to communicate this to the individual. Such a communication is not acceptable for verification if it does not clearly indicate the IRS has no tax return on file. Such individuals should re-request the IRS Verification of Nonfiling Letter by properly following IRS document request procedures (for example, a properly completed 4506-T). Individuals Who Cannot Request a Verification of Nonfiling Letter from the IRS. When a parent of a dependent student or the spouse of an independent student living in the U.S. does not have a Social Security Number (SSN), an Individual Taxpayer Identification Number (ITIN), or an Employer Identification Number (EIN), he is unable to obtain a Verification of Nonfiling Letter from the IRS. If their income is below the IRS filing threshold, these individuals must submit to the institution: A signed and dated statement: Certifying that the individual does not have a SSN, an ITIN, or an EIN, and Listing the sources and amounts of earnings, other income, and resources, that supported the individual for the tax year; and If applicable, a copy of the W 2 for each source of employment income received for the tax year, or an equivalent document. If the individual lives in a foreign country that is unable to provide an IRS Verification of Nonfiling Letter, that individual should provide the school with the above information, along with proof of that taxing authority s filing requirements. This might involve obtaining something directly from the taxing authority, or providing information that may be available on the taxing authority's website. If such documentation does not exist, or if the individual is unable to obtain the documentation, the individual may provide a signed and dated statement indicating either that the taxing authority does not provide such documentation, or that the individual was unable to obtain the documentation after contacting the taxing authority. There are instances when a tax transcript or other IRS document contains a message indicating the request could not be processed or the request could not be honored. Such documents are not acceptable as verification of nonfiling; instead, the individual should follow IRS instructions for rerequesting the IRS Verification of Nonfiling Letter or for obtaining further documentation clearly indicating there is no tax return on file for the individual for the tax year NASFAA Verification: Lesson 1 21

24 Tax Return Transcript A Income Earned from Work 1040 Transcript Wages, Salaries, Tips, etc. + Business Income or Loss Sch. C Per Computer + Farm Income or Loss (Schedule F) Per Computer 1040A Transcript Wages, Salaries, Tips, etc. + Business Income or Loss Sch. C Per Computer + Farm Income or Loss (Schedule F) Per Computer 1040EZ Transcript Wages, Salaries, Tips, etc. Lines Schedule K-1, Box 14, Code A Form W-2, Box 1 Line 7 Form W-2, Box 1 Untaxed Income and Benefits for Tax Filers If the data elements are selected for verification in any of the verification tracking groups, institutions are required to verify specific types of untaxed income for tax filers. For tax filers, institutions must verify: Untaxed portions of Individual Retirement Account (IRA) distributions; IRA deductions and payments to SEP, SIMPLE, Keogh, and other qualified plans; Untaxed portions of pension and annuity distributions; Tax-exempt interest income; and Education tax credits (American Opportunity Tax Credit and Lifetime Learning Tax Credit). 1040EZ FAFSA Line 1 Form W-2, Box 1 Student Questions 39 and 40 Parent Questions 88 and 89 While income earned from work is not a required verification data element for a federally selected applicant required to file a federal tax return, if the institution chooses to or needs to verify income earned from work, the institution may use unaltered IRS Data Retrieval Data or data from an IRS tax transcript. Signature Requirements. The statement or verification worksheet used to verify income earned from work must contain the signature of the individual certifying she is not required to file a tax return and the sources and amounts of income earned from work. No signatures are required on the W-2s or Verification of Nonfiling Letters. Documentation Because all of these data elements are reported on the federal tax return, they must be verified using one of the following two methods, as discussed earlier under Tax Data Documentation: Unaltered information obtained through IRS Data Retrieval Tool; or An IRS Tax Return Transcript or an alternative tax transcript listing tax account information. See the 2015 Verification Data and Federal Tax Forms Comparison on page 86 for a side-by-side comparison of required tax data elements and the applicable line items on the IRS tax returns and Tax Return Transcript. For more on the use of electronic signatures, see the discussion of acceptable signature formats and electronic documentation earlier in the lesson Verification: Lesson NASFAA

25 Untaxed Portions of IRA Distributions Untaxed Pension and Annuity Distributions Tax Return Transcript Total IRA Distributions minus Taxable IRA Distributions (Transcripts 1040 and 1040A only) Tax Return Transcript Total Pensions and Annuities minus Taxable Pension/Annuity Amount (Transcripts 1040 and 1040A only) 1040 Lines 15a minus 15b (excludes rollovers) 1040 Lines 16a minus 16b (excludes rollovers) 1040A Lines 11a minus 11b (excludes rollovers) 1040A Lines 12a minus 12b (excludes rollovers) 1040EZ FAFSA N/A Student Question 45e Parent Question 94e IRA Deductions and Payments 1040EZ FAFSA N/A Student Question 45f Parent Question 94f Tax Return Transcript 1040 KEOGH/SEP Contribution Deduction + IRA Deduction Per Computer (Transcripts 1040 and 1040A only) Lines Tax Return Transcript Tax-Exempt Interest Income Tax-Exempt Interest (Transcripts 1040 and 1040A only) 1040 Line 8b 1040A Line A Line 8b 1040EZ N/A 1040EZ N/A FAFSA Student Question 45b Parent Question 94b FAFSA Student Question 45d Parent Question 94d 2017 NASFAA Verification: Lesson 1 23

26 Tax Return Transcript 1040 Education Tax Credits Education Credit Per Computer (Transcripts 1040 and 1040A only) Line 50 Tax account information cannot be located by the IRS, a U.S. territory or commonwealth, or foreign central government; and Foreign and U.S. Territory tax returns. For more on verifying untaxed income for tax filers under these circumstances, see Special Tax Data Considerations later in the lesson. 1040A Line EZ N/A FAFSA Student Question 44a Parent Question 93a Signature Requirements. The student, spouse, and/or parent signatures are not required when unaltered IRS Data Retrieval data is used. A respective student, spouse, or parent signature on the tax transcript is encouraged but not required, even if it is delivered to the financial aid office by the student instead of the IRS. If the tax transcript is sent directly from the IRS to the school, it does not need a student, spouse, or parent signature on it. Untaxed Income for Tax Filers Documentation Exceptions. In rare and exceptional circumstances, alternative documentation may be used to verify untaxed portions of IRA distributions, IRA deductions and payments, untaxed portions of pensions and annuities, tax-exempt interest income, or education tax credits. These circumstances are discussed later under Special Tax Data Considerations, and they include: Tax return filing extensions; Amended tax returns; IRS tax-related identity theft; Inability to obtain a Tax Return Transcript following the period after which the IRS processes income tax returns for the tax year; Verification: Lesson NASFAA

27 Quick Quiz 2 Now it s time to check what you have learned so far. Answer the following questions and check your responses using the Answer Key on page Which of the following items are transferred from the IRS to the FAFSA using the IRS Data Retrieval Tool? (check all that apply) IRA deductions and payments U.S. income tax paid Tax filing status Payments to tax-deferred pensions and retirement savings plans Untaxed portions of pensions 2. A person who is required to report FAFSA information and will file a tax return, but who had not yet filed a tax return at the time the FAFSA was filed, should have included estimated AGI and other tax data on the FAFSA. If federally selected for verification, the tax return does not need to be filed and a signed statement with W-2s may be used to complete verification. the tax return must be filed and the resulting tax data documentation must be used to complete verification. 3. Which of the following IRS Request Flags indicates the IRS Data Retrieval Tool was used and that data has not been altered by the applicant since the data were retrieved? Which of the following items are transferred from the IRS to the FAFSA using the IRS Data Retrieval Tool? (check all that apply) Health Care Tax Credit Adjusted gross income Number of claimed exemptions Untaxed portions of IRA distributions Additional Child Tax Credit 2017 NASFAA Verification: Lesson 1 25

28 Quick Quiz 2 (cont d) 5. An alternative tax transcript known as the Return Transcript for Taxpayer (RTFTP) is required to complete verification for individuals identified by the IRS as victims of identity theft. True False 6. Which of the following IRS documents cannot be used alone to complete federal verification? (check all that apply) Record of Account Transcript Tax Account Transcript Return Transcript for Taxpayer (RTFTP) Information Returns Processing Transcript Request-Wages (IRPTR-W) Tax Return DataBase View (TRDBV) transcript 7. List all four of the signature formats which schools can accept on all verification documentation: 8. Which of the following items are transferred from the IRS to the FAFSA using the IRS Data Retrieval Tool? (check all that apply) American Opportunity Tax Credit Earned Income Tax Credit Tax return type Housing allowances for members of the military Tax-exempt interest 9. An institution may accept as verification documentation any IRS tax transcript that includes all of the income and tax information required to be verified. True False Verification: Lesson NASFAA

29 Quick Quiz 2 (cont d) 10. Which of the following can be verified using the IRS Tax Return Transcript? (check all that apply) Untaxed IRA distributions Payments to tax-deferred pension plans Untaxed pension and annuity distributions Veteran s noneducation benefits 11. If an individual is otherwise required to provide an IRS Form W-2 for verification and is unable to do so, explain what he or she should provide instead. 12. The institution should not accept an IRS Verification of Nonfiling Letter dated before April 15, 2016 May 1, 2016 October 1, 2016 July 1, Which of the following are required to verify income for nontax filers? (check all that apply) Tax Return Transcript indicating income earned from work IRS Verification of Nonfiling Letter Signed statement indicating the source and amount of each source of income earned from work Signed W-2 forms for each source of income earned from work Signed statement indicating a tax return was not and is not required to be filed 14. If an institution has already collected the required verification documentation, and then determines the taxable and untaxed income amounts provided do not appear sufficient to support the household, the institution may request additional financial information to explain how the family was financially supported during the base year. True False 2017 NASFAA Verification: Lesson 1 27

30 Household Members The number in the household must be verified for both dependent and independent applicants. For a dependent student, the number of household members does not need to be verified if the household size indicated on the ISIR is: Two, and the parent is single, separated, divorced, or widowed; or Three, and the parents are married, or unmarried and living together. For an independent student, the number of household members does not need to be verified if the household size indicated on the ISIR is: One, and the applicant is single, separated, divorced, or widowed; or Two, if the applicant is married. For Title IV purposes, the following persons may be included in the household size of the dependent applicant s parents: The applicant; The applicant s parents, excluding a parent not living in the household as a result of death, separation, or divorce; The applicant s parents other children (including graduate students, but excluding foster children primarily supported by an entity other than the parents), if they will receive more than one-half of their support from the applicant s parents from July 1, 2017 through June 30, 2018, or if they would be classified as dependent students per the FAFSA instructions; The applicant s children, if they will receive more than one-half of their support from the applicant s parents from July 1, 2017 through June 30, 2018; The applicant s parents unborn child and/or the applicant s unborn child, if that child will be born before June 30, 2018, and the applicant s parents will provide more than one-half of the child s support from the projected date of birth through June 30, 2018; and Other persons, if they live with, and receive more than one-half of their support from the applicant s parents at the time of application and will continue to receive that support from July 1, 2017 through June 30, Generally, foster children are not considered children of the foster parents and are not counted in the household size for Title IV purposes. Children for whom the foster care system, state, or other entity provides more than half support are excluded from household size. On the other hand, if the dependent student's parent or the independent student is providing more than half of the foster child's support throughout the award year covered by the FAFSA, then the child can be included in the parent's household size. The same is true for children placed in kinship care or kinship foster care by a child welfare program or child protective services program, if the program does not provide benefits covering more than half of the child's support throughout the award year covered by the FAFSA. The following persons may be included in the household size of the independent applicant: The applicant; The applicant s spouse, excluding a spouse not living in the household as a result of death, separation, or divorce; The applicant s children (including graduate students, but excluding foster children primarily supported by an entity other than the applicant), if they will receive more than one-half of their support from the applicant from July 1, 2017 through June 30, 2018; The applicant s and/or spouse s unborn child, if that child will be born before June 30, 2018 or during the award year, and the applicant and/or spouse will provide more than one-half of the child s support from the projected date of birth through June 30, 2018; and Other persons, if they live with the applicant and receive more than one-half of their support from the applicant at the time of application and will continue to receive that support from July 1, 2017 through June 30, Verification: Lesson NASFAA

31 It is important to note that, if an independent applicant is receiving benefits on the behalf of his minor children, the amount received counts as support when determining whether an applicant is providing more than half of the child s support, which determines whether the child is a legal dependent for purposes of completing the FAFSA. Documentation To verify the number in household, the student applicant must provide a signed statement or verification worksheet which lists the: Name and age of each household member for the award year; and Household member s relationship to the applicant. Signature Requirements. The signed statement or verification worksheet must have the student s signature and at least one of the dependent student s parent s signatures. dependent and independent applicants if the number is greater than one. The individual must be enrolled in an eligible degree, certificate, or other recognized educational credential at a Title IV-eligible institution. Other individuals may not be included in number in college if enrolled in U.S. military academies, because all educational expenses are covered by the military. Parent(s) cannot automatically be included in number in college, but institutions have the ability to exercise professional judgment (PJ) and include parents, with proper documentation. The number of household members in college changes often after the time of application. Although this data element does not have to be verified under certain circumstances, institutions may consider doing so because of the significant impact of this data element on the EFC calculation. Professional judgment adjustments are discussed in Lesson 2. Institutions are required to verify the applicant s claim on the FAFSA that she has a high school diploma or its recognized equivalent, or was home schooled. Number of Household Members Enrolled in College If the data element is selected, the institution must verify the number of household members who are or will be enrolled in postsecondary education during the award year. Only individuals included in household size (excluding parents) and who are or will be attending a postsecondary institution at least half time during the award year may be included in the number enrolled in college. The number in college must be verified for both Documentation To verify the number in college, the applicant must provide a signed statement or verification worksheet listing the: Name and age of each household member who is or will be enrolled at least half-time in an eligible degree, certificate, or other recognized educational credential at an eligible postsecondary educational institution during the award year; and The name of the postsecondary institution in which the individual is or will be enrolled. If the institution has reason to doubt the accuracy of information provided on the signed statement or verification worksheet, it must obtain documentation from each postsecondary institution indicating the household member in question is or will be enrolled at that institution at least half time in a program leading to a recognized educational credential during the award year, unless the institution determines that such documentation is unavailable because the household member has not registered for classes at that institution NASFAA Verification: Lesson 1 29

32 If other students in the family are not yet enrolled for the award year, the institution may accept alternative documentation instead of a signed statement or verification worksheet, such as a letter of admission from the postsecondary institution the individual plans to attend. Similarly, if any of the applicant s family members are enrolled at the same institution as the applicant, the institution can verify enrollment from its own records rather than require a statement or verification worksheet from the applicant. Signature Requirements. The signed statement or verification worksheet must have the student s signature and at least one of the dependent student s parent s signatures. High School Completion Status If selected for verification, institutions are required to verify the applicant s claim on the FAFSA that she has a high school diploma or its recognized equivalent, or was home schooled. Although high school completion is not used to calculate the student s EFC, high school completion is one of the Title IV general student eligibility criteria. Recognized equivalents of and alternatives to a high school diploma include students who: Received a General Educational Development (GED) certificate; Received a state certificate or transcript after passing a state-authorized exam the state recognizes as the equivalent of a high school diploma [e.g. High School Equivalency Test (HiSET), Test Assessing Secondary Completion (TASC), or other recognized examination]; Successfully completed at least a two-year program that is acceptable for full credit toward a baccalaureate degree, which can include: Completion of an associate degree, Completion of at least 60 semester or trimester credit hours or 72 quarter credit hours that does not result in the awarding of an associate degree, but is acceptable for full credit toward a baccalaureate degree at any institution, or Enrollment in a baccalaureate degree program where at least 60 semester or trimester credit hours or 72 quarter credit hours have been successfully completed, including credit hours transferred into the baccalaureate degree program; Received a secondary school completion credential for home schooling under state law; Did not complete high school but excelled academically in high school and: Seeks to enroll in at least an associate degree or its equivalent, and Has met the postsecondary school s formalized, written procedures for admitting such students; or Qualified under limited ability-to-benefit (ATB) provisions. Graduate Students. Verification of high school completion also is required for graduate students selected in verification tracking group V4 or V5. However, an institution is not required to collect proof of high school completion for a graduate student if admission into the graduate program requires the completion of at least two years of undergraduate coursework acceptable for full credit toward a baccalaureate degree, as described above. Documentation To complete verification of high school completion status, the student must provide one of the following documents: A copy of a high school diploma; A copy of a final, official high school transcript showing the date when the diploma was awarded (not some date in the future); A copy of the DD Form 214, Certificate of Release or Discharge from Active Duty, if it indicates that the student is a high school graduate or the equivalent; A copy of the secondary school leaving certificate (or other similar document) from the Ministry of Education for a student who completed a secondary education in a foreign country and is unable to obtain a copy of his high school diploma or transcript; Verification: Lesson NASFAA

33 A copy of a GED certificate or GED transcript; A state certificate received by a student after passing a state-authorized examination the state recognizes as the equivalent of a high school diploma (e.g., HiSET, TASC, etc.); A test transcript received by a student after passing a state-authorized examination the state recognizes as the equivalent of a high school diploma (e.g., HiSET, TASC) if it specifically indicates that the state has determined the test results meet its high school equivalency requirements, or includes language indicating the final score is a passing score; An academic transcript indicating the student successfully completed at least a two-year program, or at least two years worth of postsecondary coursework, that is acceptable for full credit toward a baccalaureate degree; A copy of a secondary school completion credential for home school (other than a high school diploma or its recognized equivalent) if state law requires home schooled students to obtain that credential; A transcript or the equivalent, signed by the parent or guardian of a home-schooled student, listing the secondary school courses the student completed and documents the successful completion of a secondary school education in a home school setting; For a student who has not completed high school and is seeking enrollment in a program leading to at least an associate degree or its equivalent, documentation from the high school that he or she excelled academically and documentation that he or she meets the written policy for admitting such students at the postsecondary institution; Documentation of the student s qualification for enrollment as a regular student under the ATB provisions; or For a student enrolled in an eligible career pathway program, documentation that she passed an approved ATB test or completed at least 6 credit hours or 225 clock hours that are applicable toward a degree or certificate offered by the school. In rare cases when it is impossible for a refugee, an asylee, or a victim of human trafficking, to obtain documentation of her secondary school completion in a foreign country, the applicant must self-certify by submitting: Proof of her attempt to obtain documentation of secondary school completion in a foreign country (i.e., copy of an or letter along with proof of mailing); A signed and dated statement indicating the applicant completed her secondary school education in a foreign country, the name and address of the foreign high school, and the date when the foreign high school diploma was awarded; and A copy of the entry status documentation identifying the applicant s current or prior status as a refugee, an asylee, or a victim of human trafficking and who entered the U.S. after the age of 15. Institutions with the expertise to do so may evaluate foreign secondary school credentials to determine their equivalence to U.S. high school diplomas. If the school already has received one of the above forms of documentation of high school completion status as part of the admission or any other process, it does not need to ask for further documentation. A student who is unable to provide documentation of the above must contact the financial aid office. Alternative Documentation. An institution may accept alternative documentation to verify high school completion status in cases where documentation of an applicant s secondary school completion is unavailable, such as when the applicant s: Secondary school is closed and information is not available from another source, such as the 2017 NASFAA Verification: Lesson 1 31

34 local school district or a state department of education; or The parent or guardian who provided the student s home schooling is deceased. Institutions with the expertise to do so may evaluate foreign secondary school credentials to determine their equivalence to U.S. high school diplomas. Otherwise, they may need to use a third-party foreign diploma evaluation service for this purpose. Signature Requirements. There are no signature requirements associated with documentation of high school completion status. Identity and Statement of Educational Purpose A selected applicant is required to verify who he claims to be and that any Title IV funds received will be used only for educationally related expenses. These two elements are selected and verified together. Documentation The student must appear in person at the school and present to an institutionally authorized official an unexpired, valid government-issued photo identification (ID) which can include, but is not limited to, the following: Passport; Driver s license; Non-driver s identification card; or Other state-issued ID. The school must maintain an annotated copy of the presented identification that includes the date the ID was presented and the name of the authorized school official receiving it. The student must also sign a Statement of Educational Purpose in the presence of the school official certifying who the student is and that the federal student aid he receives will only be used for educational purposes and to pay the costs of attending the school for the academic year. If the student is unable to appear in person at the school, the student must appear before a notary public to present and sign the ID and Statement of Educational Purpose. The student must then submit to the school the annotated copy of his ID, as well as the copy of the Statement of Educational Purpose which has been signed by the notary public confirming that the student appeared before the notary public and presented the ID confirming his identity. Schools and notaries public must use exact language provided by ED for the Statement of Educational Purpose found on page 81. Because there is a general prohibition on photocopying military IDs, they cannot be used for this purpose. Verification of Other Application Information Institutionally Selected Data The institution may choose to verify FAFSA data beyond those required by Title IV verification regulations, and has full discretion to determine which information must be verified. For CPS-selected students, the institution may verify other application items in addition to those required to be verified by the CPS. The institution must follow all applicable application processing deadlines for any data elements selected. The school must also resolve conflicting information. Optional data elements may include, but are not limited to: Cash, saving, and checking accounts; Real estate and investment properties; and Other forms of untaxed income. Cash, Savings, and Checking Accounts If you have a tax return showing high interest income but the reported amount of cash, savings, and checking accounts is lower than you would expect, you may question the accuracy of the reported amount. You may seek documentation Verification: Lesson NASFAA

35 verifying the questioned amount as of the day the application was filed. Other Real Estate and Investment Properties The family s primary residence is not reported on the FAFSA. An applicant s family may, however, own other real estate or investment properties, such as a vacation home, other residential rental property, or commercial property. The values of these must be reported as investments on the student s application, so the school may choose to verify them separately. Untaxed Income Reported on the FAFSA Although the Other Household Resources Verification Tracking Group (V6) is eliminated for , institutions still may elect to select applicants for institutional verification of other untaxed income reported on the FAFSA. Untaxed income information is reported on the FAFSA in questions 45 for the student and 94 for the dependent student s parents: Payments to tax-deferred pension and savings plans (Questions 45a and 94a); Child support received (Questions 45c and 94c); Housing, food, and other living allowances paid to members of the military, clergy, and others (Questions 45g and 94g); Veterans noneducation benefits (Questions 45h and 94h); Other untaxed income not reported elsewhere on the FAFSA (Questions 45i and 94i); and Money received or paid on the student s behalf (Question 45j). Payments to Tax-Deferred Pension and Savings Plans. Payments to tax-deferred pension and savings plans include amounts paid directly or withheld from earnings. Amounts include, but are not limited to, amounts reported under codes D, E, F, G, H, and S in Boxes 12a through 12d of the W-2. It does not include amounts reported under code DD for employer contributions toward employee health benefits. Child Support Received. The student and parent (if dependent) must report child support received for any of her children. This does not include foster care and adoption payments. Housing, Food, and Other Living Allowances Paid to Members of the Military, Clergy, and Others. Housing, food, and other living allowances paid to members of the military, clergy, and others, which includes any cash payments and the cash value of any such benefits. It includes the military basic allowance for subsistence (BAS), but it does not include the value of on-base military housing or the value of the military basic allowance for housing (BAH). If the school chooses to verify institutionally selected data elements beyond those verified on federally selected applications, the school must decide what documentation to collect to verify the data. Veterans Noneducation Benefits. Veterans noneducation benefits include, but are not limited to, benefits such as Disability, Death Pension, Dependency and Indemnity Compensation (DIC), and VA Educational Work-Study allowances. Other Untaxed Income. Other untaxed income not reported elsewhere on the FAFSA includes, but is not limited to, such benefits as workers compensation and disability benefits. It also includes any untaxed portions of health savings accounts reported on line 25 of the 2015 IRS 1040 tax return. Money Received or Paid on the Student s Behalf. Money received or paid on the student s behalf includes any money received which is not reported elsewhere on the FAFSA. This includes any monetary support received from a parent whose financial information is not provided on the FAFSA and that is not part of a legal child support 2017 NASFAA Verification: Lesson 1 33

36 agreement. It does not include support from a parent whose information is reported on the FAFSA. For example, if someone other than a parent on the FAFSA is paying rent, utility bills, etc., for the student, it is included as untaxed income on the FAFSA. Likewise, if someone other than a parent on the FAFSA gives the student cash or gift cards, etc., those values are also reported on the FAFSA. Amounts paid on the student s behalf also include any distributions to the student from a 529 plan owned by someone other than the student or the dependent student s parents, such as grandparents, aunts, and uncles. Other Forms of Untaxed Income Not on the FAFSA The school may choose to verify other forms of untaxed income not included in one of the verification tracking groups or on the FAFSA. If the school chooses to do so, care must be taken not to include the following benefits: Student aid; Federal veteran s educational benefits; The value of on-base military housing or offbase housing allowances (i.e., BAH); Rent subsidies for low-income housing; State foster care or adoption assistance payments and services under Part A or Part E of Title IV of the Social Security Act; Per capita payments to Native Americans; Heating and fuel assistance, such as benefits under the Low-Income Home Energy Assistance Act (LIHEA); Means-tested welfare benefits, such as TANF and SNAP; Untaxed Social Security benefits and Supplemental Security Income; Combat pay; Foreign income exclusions; Credits for federal tax on special fuels; Earned Income Credits and Additional Child Tax Credits; Flexible spending arrangements; or In-kind support. These forms of income are prohibited by law from inclusion in the EFC calculation for Title IV purposes. Additional information related to the treatment of in-kind support may be found on page AVG-23 of the FSA Handbook. Exceptionally Low Income If an institution believes the reported taxable and untaxed income amounts do not appear to provide sufficient financial support for the number of family members in the household, the institution may request additional financial information from the applicant to explain how the family was financially supported during the 2015 calendar year. Documentation If the school chooses to verify institutionally selected data elements beyond those verified on federally selected applications, the school must set its own policies and procedures and decide what documentation to collect to verify the data. The school can require any reasonable documentation for institutionally selected data elements. Some examples of possible documentation include, but are not limited to: A signed statement or verification worksheet indicating each source of untaxed income and the amount of income received; and A copy an IRS Form W-2 for each source of employment income received for the 2015 tax year. The IRS Form W-2 can be used to verify whether there was any such income that should have been reported on the FAFSA or if it was reported correctly. The Highlights of IRS Form W-2 resource is provided on page 88 to assist with institutional verification of untaxed income which may appear on the W Verification: Lesson NASFAA

37 The institution may choose to request that the student, spouse, or parent provide documentation in addition to a verification worksheet, signed statement, or W-2s. If the institution chooses to do this, the type and format of any alternative documentation is determined by the institution. The institution decides what it deems appropriate in such cases. Signature Requirements Institutions establish their own signature requirements for documentation of other application information. Special Tax Data Considerations Financial Aid Administrators and Tax Expertise ED does not require financial aid professionals to have special knowledge or expertise regarding the U.S. tax code; however, financial aid administrators are required to have basic knowledge of those tax issues that could constitute conflicting information and substantially affect the EFC calculation. The financial aid administrator is obligated to know the following: Whether an individual is required to file a tax return; What the correct tax filing status for a tax filer should be; and That an individual cannot be claimed as an exemption by more than one person. To confirm whether an individual is required to file a tax return, or what his tax filing status should be, either the tax filer or the financial aid administrator must consult with the IRS or a tax expert to confirm that information and document it for verification purposes. The financial aid administrator also may be able to find guidance in IRS Publication 17, Your Federal Income Tax For Individuals. Example: If a person whose data were required on the FAFSA submits a signed statement claiming nonfiler status, and there is reason to believe that person would have been required to file a U.S. tax return, this constitutes conflicting information. This might require a letter from the IRS, a copy of the applicable tax provision, documentation from a tax expert or tax preparer, or other documentation (beyond the nonfiler s self-certification) supporting the individual s claim of nonfiler status. Example: If married parents of a dependent student have both filed separately as head of household (because they can get a greater tax deduction that way), and IRS rules stipulate a person filing as head of household must be unmarried or considered unmarried (among other things), this would constitute conflicting information. This might require a signed, third-party attestation verifying that the applicant s parents meet IRS head of household filing rules, as well as confirmation of the parents marital status. If the parents filed incorrectly, an amended tax return or returns correcting the parents tax filing status should be filed and submitted before the school can finish processing the student s Title IV aid. NASFAA does not make tax filing determinations for schools. Tax-related questions should be directed to an IRS official or other tax expert. IRS contact information and Publication 17 may be found on the IRS website at Information about financial aid administrators and tax expertise is found on pages AVG-113 to AVG-114 of the FSA Handbook. Tax Extensions Occasionally, a tax filer will need an extension to file his tax return with the IRS. Sometimes, multiple extensions will be requested. If the tax filer gets an approved extension from the IRS, the school must accept the alternate documentation specified in the regulations to complete verification. Alternative documentation includes all of the following for the taxpayer: A copy of IRS Form 4868, Application for Automatic Extension of Time to File U.S NASFAA Verification: Lesson 1 35

38 Individual Tax Return that the individual filed with the IRS for the tax year; A copy of an unexpired IRS approval of an extension beyond the automatic six-month extension if the individual requested an additional tax filing extension for the tax year; A copy of the IRS Verification of Nonfiling Letter, or confirmation from another relevant taxing authority, dated on or after October 1, 2016; A copy of a W-2 or equivalent document for each source of employment income received for the tax year; and If self-employed, a signed statement certifying the amount of the individual s AGI and U.S. income tax paid for the tax year. For an individual who was called up for active duty or for qualifying National Guard duty during a war or other military operation or national emergency, instead of IRS Form 4868, an institution must accept a signed statement from the individual certifying that she has not filed an income tax return or a request for a filing extension because of that service. The institution may choose to have a policy to request that the applicant eventually submit finalized tax return information using IRS Data Retrieval or a copy of a Tax Return Transcript after the tax return has been filed and before an institutionally established deadline. If the institution requests final tax return data, it must re-verify the required data once the IRS Data Retrieval data or tax transcript is received. An institution may not apply this policy to individuals granted a filing extension beyond the institution s established deadline because the individual was called up for active duty or for qualifying National Guard duty during a war or other military operation or national emergency. Signature Requirements. No signatures are required on IRS Form 4868 or the W-2s. Refer to Lesson 3 for a discussion of the consequences and required aid adjustments when a student fails to complete verification under the school s optional tax extension policy. Amended Tax Returns There are instances when an applicant, spouse (if married), or parents (if dependent) must correct information on a previously filed tax return. The IRS Data Retrieval Tool does not transfer any of the tax information from an amended tax return. Therefore, individuals who originally used IRS Data Retrieval to complete their FAFSA may not rely on that tax information to complete verification if an amended tax return was filed. Similarly, the IRS Tax Return Transcript only includes information from the original tax return and not the amended tax return. When the institution is aware that an individual has filed an amended tax return, the institution will need to obtain information from both the original and amended tax returns. The tax filer will need to provide: An IRS Tax Return Transcript containing information from the original tax return filed with the IRS or any other IRS tax transcript containing all income and tax information from the original tax return that is subject to verification (as discussed earlier under Tax Data Documentation); and IRS Form 1040X that was filed with the IRS. Additionally, the Tax Account Transcript can be used in conjunction with a Tax Return Transcript and IRS Form 1040X to complete verification when an amended tax return is filed. An IRS Record of Account Transcript also may be used instead of a Tax Return Transcript; however, it may be complicated and difficult to interpret for this purpose. Individuals who use the IRS Data Retrieval Tool, and then amend their tax returns, still must provide verification documentation, as outlined above. Schools cannot rely on IRS Data Retrieval information instead of a tax transcript. If the school received the tax filer s tax transcript based on the originally filed tax return, the school does not need to request, and the tax filer does not need to provide, a new tax transcript containing the amended information at a later date. Signature Requirements. The 1040X requires the signature of the tax filer or his spouse, if filing jointly. No signatures are required on the tax transcripts Verification: Lesson NASFAA

39 Separating Income on Joint Tax Returns In certain situations, such as when an applicant s marital status has changed, it may be necessary to separate income on a joint tax return. For an applicant (or a dependent applicant s parent) who filed a joint return but who was widowed, divorced, or separated at the time the FAFSA was filed, the institution should separate the individual s income and taxes paid. Step 1: Obtain a copy (as appropriate) of the applicant s or the parent s: Tax Return Transcript or other acceptable tax transcript obtained from the IRS that lists tax account information for tax year 2015; and A 2015 W-2 form each source of employment. Obtain (as appropriate) from the applicant or the parent, a signed statement certifying income, if a W- 2 form is not available or a self-employed individual does not have a W-2 form. In certain situations, such as when an applicant s marital status has changed, it may be necessary to separate income on a joint tax return. Step 2: To determine the appropriate AGI, start with the income figure from the individual s W-2 form and identify income from the joint return that represents the individual s personal income. Income earned on jointly-owned accounts, investments, businesses, or farms should be assessed at 50 percent. Losses on jointly-owned businesses, farms, or investments should be assessed at 50 percent. If AGI listed on the joint return was adjusted ( Adjustment to Income ), the institution should reduce the individual s AGI by the amount or a proportion of the adjustment that applies to the individual. Step 3: To figure taxes paid on an individual s AGI, the institution may use either of the following methods: Tax Table (preferred method): The institution uses the IRS Tax Table or Tax Rate Schedule for the appropriate year to calculate the amount of tax that would have been paid if a separate return had been filed; or Proportional Distribution Method: The institution determines the percentage of the joint AGI attributable to each individual, and then assesses the joint tax paid at the same percentage. For more information and examples on separating income on a joint tax return, refer to page AVG-85 of the FSA Handbook. Signature Requirements. Neither the tax transcript nor the W-2 forms require signatures. IRS Tax-Related Identity Theft Occasionally, a tax filer will be unable to obtain an IRS Tax Return Transcript or other alternative tax transcript because she is identified by the IRS as a victim of tax-related identity theft. These individuals must provide the following: An alternate tax transcript known as the Tax Return DataBase View (TRDBV) transcript; and A statement signed and dated by the tax filer indicating that she is a victim of IRS tax-related identity theft and that the IRS has been made aware of the tax-related identity theft. Tax filers who are denied an IRS Tax Return Transcript using one of the regular request processes due to IRS identity theft will be referred to the Identity Protection Specialized Unit (IPSU) tollfree number at Tax filers who believe they are victims of identity theft do not need to be referred to the IPSU; they may call the number directly or go to the IRS identity theft website at After the IPSU authenticates the tax filer s identify, the tax filer can request that the IRS mail the TRDBV to the tax filer NASFAA Verification: Lesson 1 37

40 Although the TRDBV looks different than the standard IRS Tax Return Transcript, it is an official IRS tax transcript and it is acceptable documentation for completing verification. A tax filer who is unable to obtain a TRDBV may instead submit another official IRS tax transcript previously discussed or an equivalent document provided by the IRS if it includes all of the income and tax information required to be verified (e.g., a TRDPG, which is an online page view of the TRDBV). This guidance only applies to individuals who are identified by the IRS as being victims of tax-related identity theft (and not for such things as credit card related identity theft, etc.). More information on the TRDBV, including a sample copy, may be found in Dear Colleague Letter GEN Signature Requirements. Unless the school has reason to suspect the authenticity of the TRDBV, there is no need for the school to obtain an IRS signature, stamp, or any other validation on the form. Likewise, the tax filer s signature is not required on the TRDBV. The taxpayer s signature is required on the written statement acknowledging the identity theft and affirming the IRS is aware of it. Inability to Obtain a Tax Return Transcript A signed copy of an income tax return may be used in circumstances when the taxpayer is unable to obtain an IRS Tax Return Transcript or other acceptable tax transcript (previously discussed) following the period after which the IRS processes income tax returns for the tax year. This alternative documentation can only be used when the tax filer has recently requested, but was unsuccessful in obtaining, an IRS tax transcript. ED announces if and when this alternative can be used by institutions each year; this alternative cannot be used until ED publishes the annual announcement and instructions on what alternative documentation should be collected in addition to a copy of the signed tax return. Until that time, a tax transcript is required to complete verification. For the award year, ED s announcement wasn t published until an October 18, 2016, Electronic Announcement. This Electronic Announcement informed institutions that for the remainder of the award year, the institution must collect all of the following in order to complete verification under this alternative: A signed paper copy of the 2015 tax return; A statement from the tax filer, on or attached to the tax return, certifying that the tax return includes the same information that was filed with the IRS; For tax filers who requested an IRS tax transcript using IRS Form 4506T-EZ or Form 4506-T, a copy of the IRS response that was mailed to the tax filer stating that the IRS could not provide the requested transcript, signed and dated by the tax filer; For tax filers who requested an IRS tax transcript using the IRS online transcript request process (Get Transcript Online or Get Transcript by Mail), a copy of the screen print from the official IRS webpage displaying a message indicating that the transcript request was unsuccessful, signed and dated by the tax filer; and A completed and signed IRS Form 4506T-EZ or Form 4506-T including on line 5 the name, address, and telephone number of the institution as the third party to whom the IRS is to mail the 2015 IRS tax transcript. Unless the institution doubts the accuracy of the information on the submitted copy of the tax return, it can proceed with verification and simply retain the IRS Form 4506 and not submit it to the IRS. However, if the institution doubts the accuracy of the information on the signed copy of the paper tax return, it is instructed to send the 4506T-EZ or T to the IRS and wait for the IRS to return the Tax Return Transcript or confirmation that a transcript was not available for that tax filer before verification could be completed. Failure of the tax filer to successfully register for the Get Transcript Online process is not a sufficient reason to accept a paper copy of the tax return or alternative documentation described here. This tax filer will need to request a tax transcript by mail using the Get Transcript by Mail option or by using the paper 4506-T or 4506T-EZ and provide documentation from the IRS that the tax transcript is unavailable Verification: Lesson NASFAA

41 The IRS automated phone tool at does not provide written confirmation of the failure of a transcript request; there is no alternative documentation for that process. These tax filers must request a tax transcript online (Get Transcript Online or Get Transcript by Mail) or by mail (4506T- EZ or 4506-T). This alternative for the award year had not been announced as of the writing of this self-study guide. Again, this alternative can only be used if and when ED announces that it is acceptable for the award year. Stay tuned to NASFAA s Today s News and ED s IFAP website for award year guidance in this regard. Signature Requirements. In these rare instances when a paper copy of the tax return is used, it must be signed by the student, spouse, or parent tax filer, or the tax preparer. If signed by a tax preparer, the preparer must provide his name and Social Security Number, Employer Identification Number (EIN), or Preparer Tax Identification Number (PTIN). NASFAA has confirmed with ED that the term tax preparer s name refers to an individual person s name, not the name of a company, organization, etc. For example, H&R Block would not be acceptable as a tax preparer s name. Government Cannot Locate Tax Account Information If a tax filer did not retain a copy of his 2015 tax account information and that information cannot be located by the IRS, a government of a U.S. territory or commonwealth, or a foreign central government, the institution must accept the following to complete verification: A copy of an IRS Form W 2 or equivalent document for each source of employment income received for the 2015 tax year; If self-employed, a signed statement certifying the amount of AGI and taxes paid for that selfemployment for the 2015 tax year; A copy of a wage and tax statement, or a signed statement, by an individual who has filed an income tax return with a U.S. territory or commonwealth or a foreign central government certifying the amount of AGI and taxes paid for the 2015 tax year; Documentation from the IRS or other relevant taxing authority indicating the individual s 2015 tax account information cannot be located; and A signed statement indicating the individual did not retain a copy of his 2015 tax account information. Signature Requirements. A signed statement must contain the taxpayer s signature. W-2s, wage and income statements, and taxing authority documents do not require signatures. Foreign and U.S. Territory Income Foreign income must be included on the FAFSA, even if it cannot be taken out of the country in which it was earned. If the applicant, applicant s spouse, or the applicant s parent(s) earned foreign income and paid taxes to a central foreign government, income and taxes paid are treated in same manner as U.S. income and taxes paid. When a student or parent has filed a tax return in both the U.S. and in a foreign country, she should use only the data from the U.S. tax return when filling out the FAFSA and when completing verification. Documentation Tax Filers. For tax filers in a U.S. territory (Guam, American Samoa, and U.S. Virgin Islands), a U.S. commonwealth (Puerto Rico and Northern Mariana Islands), or other foreign country, taxable income should be verified using: A tax transcript from the relevant taxing authority of the territory, commonwealth, or foreign central government, if that transcript can be obtained at no cost; or If a transcript is not free, a signed copy of a tax return or similar document filed with the territory, commonwealth, or foreign central government, where the applicant filed the tax return. The income tax returns of Puerto Rico, Guam, American Samoa, and the U.S. Virgin Islands are considered to be the equivalents of IRS forms 1040A and 1040EZ. Other foreign tax returns are considered equivalent to the IRS Form NASFAA Verification: Lesson 1 39

42 Amounts on Puerto Rico, Guam, American Samoa, and U.S. Virgin Islands tax returns are already reported in U.S. dollars. The institution should look at tax return line items which are comparable to the IRS line items when completing verification. All applicable income and tax data from other foreign tax returns should be reported on the FAFSA in U.S. dollars based on the exchange rate at the time the FAFSA was signed. Likewise, for verification, the taxpayer must provide the U.S. dollar equivalent for each verification data element from the lines of the foreign tax form which correspond most closely to those on the IRS tax return. Foreign language translation is left to the institution and the taxpayer. If the applicant, spouse, or parent(s) earned foreign income, but did not pay any taxes on that income, it should be reported as untaxed income. As with tax return data, the value of foreign income should be reported in U.S. dollars, using the exchange rate at time of application. Nontax Filers. For residents of the Republic of the Marshall Islands, the Federated States of Micronesia, the Republic of Palau, a U.S. territory or commonwealth, or other foreign country, a nontax filer must submit: A copy of the individual s Wage and Tax Statement or equivalent document for each source of employment for the tax year; A signed statement indicating the sources and amounts of income earned from work during the tax year; A signed statement indicating the individual did not file, and is not required to file, a tax return for the tax year; and A confirmation of nonfiling from the relevant tax authority, or alternative documentation indicated earlier when the individual is unable to obtain an IRS Verification of Nonfiling Letter. Signature Requirements. Student, spouse, and parent signatures are not required on tax transcripts, Wage and Tax Statements, or confirmation of nonfiling letters from taxing authorities. Signatures are required on all written statements and the respective foreign tax returns which are provided for verification. Only one taxpayer s signature is required on a jointly filed tax return. Verification Status Codes For all Federal Pell Grant recipients, the verification status code must be reported on the student s origination record in the Common Origination and Disbursement (COD) System. The verification status codes are as follows: Status Code V W S Blank Meaning Verified Without documentation Selected/ Not verified Not verified Comments Verification was completed on records selected for verification by either the CPS or the school. The applicant has been selected for verification and the school has chosen to pay the initial Federal Pell Grant disbursement without verification documentation (i.e., an interim disbursement). This code must be updated once verification is completed. The applicant was selected for verification by the CPS, but was not verified because the applicant is exempt from verification under one of the verification exclusions in 34 CFR (b). The applicant was not selected by the CPS or the school; verification not performed. The applicant was selected by the CPS after the student ceased attending the school and after all disbursements and late disbursements were made to the student (or parent PLUS borrower). Refer to the Reporting and Verification Status Codes information on page 91. Also, refer to the COD Technical Reference for further information on the submission of origination records for the Federal Pell Grant Program. The COD Technical Reference may be found on ED s FSA Download website. Interim disbursements are discussed in Lesson Verification: Lesson NASFAA

43 Quick Quiz 3 Now it s time to check what you have learned so far. Answer the following questions and check your responses using the Answer Key on page Foster children for whom the state provides more than half support are not included in the household size for Title IV purposes. True False 2. Verification of household size on federally selected applications is required in which of the following circumstances? (check all that apply) The household size indicated on the dependent student s ISIR is two and the parents are married The household size indicated on the independent student s ISIR is two and the student is married The household size indicated on the dependent student s ISIR is three and the parents are unmarried and living together The household size indicated on the independent student s ISIR is one and the student is divorced 3. When an individual is required for the award year to verify his or her tax data, but that individual has filed for an extension to file his or her taxes with the IRS, which of the following alternative documentation is required to complete verification? (check all that apply) A copy of IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Tax Return the individual filed with the IRS for the tax year If applicable, a copy of an expired or unexpired IRS approval of an extension beyond the automatic six-month extension if the individual requested an additional tax filing extension for the tax year A copy of a W-2 for each source of employment income received for the tax year If self-employed, a signed statement certifying the amount of the individual s AGI and U.S. income tax paid for the tax year An IRS Verification of Nonfiling Letter dated on or after January 1, If the student is unable to appear in person at the school to verify his or her identity and Statement of Educational Purpose, the student must appear before a to his or her identification and Statement of Educational Purpose NASFAA Verification: Lesson 1 41

44 Quick Quiz 3 (cont d) 5. What 14 forms of documentation are acceptable to verify high school completion status? 6. Draw an arrow to match the Verification Status Code in the left-hand column to the applicable description in the right-hand column: Verification Status Code Description V Applicant not selected by the CPS or the institution, so verification was not performed W Applicant selected by CPS, but not verified because the application met one of the verification exclusions S Verification was completed on records selected for verification by either the CPS or the school blank Applicant selected and institution has chosen to pay initial Federal Pell Grant disbursement without documentation Verification: Lesson NASFAA

45 Quick Quiz 3 (cont d) 7. Payments to tax-deferred pension and savings plans can be verified using which of the following codes listed in W-2 Boxes 12a through 12d? (check all that apply) D DD H Y 2017 NASFAA Verification: Lesson 1 43

46 Learning Activity: Required Verification Documentation Review each of the following scenarios and detail what documentation must be collected from the student aid applicant in order to complete verification on federally selected applications. Also indicate what, if any, signatures are required on the documentation which is collected. After you have completed each scenario, review your school s verification policy to see if it requires additional documentation beyond federal requirements. It may be helpful to discuss these situations with a co-worker to see if you feel additional documentation might need to be collected and what the school might deem appropriate additional documentation to collect. Answer the following questions and check your responses using the Answer Key on page Karl Karl is a dependent student at Walker College. He is federally selected for verification in the Custom Verification Tracking Group on his FAFSA. Karl was employed in 2015 and filed an income tax return. He used the IRS Data Retrieval Tool and the ISIR indicated an IRS Request Flag of 04. Karl indicated that he completed high school on the FAFSA. His father, Rick, is the only parent included on the FAFSA. Rick also filed an income tax return for 2015, used the IRS DRT, and the ISIR indicated a IRS Request Flag of 02. Rick also indicated on the FAFSA that child support was paid during the 2015 calendar year for Karl s sister Judith to her mother, Lori. 1. What is the Verification Tracking Flag for this Tracking Group? 2. Detail what documentation (if any) is federally required from Karl to verify his information, including all information which must be contained in that documentation. 3. Detail what documentation (if any) is federally required from Rick to verify his information, including all information that must be contained in that documentation. 4. Which documents collected in #2 or #3 above require Karl s signature? 5. Which documents collected in #2 or #3 above require Rick s signature? Verification: Lesson NASFAA

47 Learning Activity: Required Verification Documentation (cont d) 2. Lizzie Lizzie is a first-year dependent student at Flowers Institute. She is federally selected for verification in the Standard Verification Tracking Group on her FAFSA. Her mother and father, Carol and Tyreese, reported their income and asset information on the FAFSA. Lizzie and her parents filed taxes and used the IRS Data Retrieval Tool (DRT) when they completed her FAFSA. The IRS Request Flag on Lizzie s ISIR is 02. Lizzie indicated five in the household size and two in college on her FAFSA. This includes her sister Mika and her brother Daryl. Mika will be enrolled at least half time in a baccalaureate degree program at Grove College during the academic year. 1. What is the Verification Tracking Flag for this Tracking Group? 2. Detail what documentation the school is required collect to complete verification, including all information that must be contained in that documentation. 3. Indicate whether or not the following individual s signature is required on all of the documentation collected for #2 above. Yes No Yes No Yes No Lizzie s signature Carol s and Tyreese s signatures Carol s or Tyreese s signatures 4. After you have collected the above documentation, you have reason to believe the number in college information may be inaccurate. What additional documentation must you collect from Lizzie? 2017 NASFAA Verification: Lesson 1 45

48 Learning Activity: Required Verification Documentation (cont d) 3. Maggie Maggie is a married independent student who filed her FAFSA. She and her husband, Glenn, have no children so there are only two listed in the household. Only Maggie will be enrolled in college. This is her second year at Woodbury University. Maggie worked one part-time job and was not required to file a tax return in 2015, so she did not file one. Glenn filed an IRS 1040 for 2015, and he used the IRS Data Retrieval Tool when completing Maggie s FAFSA. Her ISIR has an IRS Request Flag of 04. She has been selected for the Standard Verification Tracking Group. Woodbury s financial aid office uses a verification worksheet to conduct verification for the Standard Verification Tracking Group. 1. What is the Verification Tracking Flag for this Tracking Group? 2. Detail what documentation the school is required collect to complete verification, including all information that must be contained in that documentation. From Maggie: From Glenn: 3. Indicate whether or not the following individual s signature is required on the above documentation. Yes No Yes No Yes No Maggie s signature on the verification worksheet Glenn s signature on the verification worksheet Maggie s and Glenn s signature on the tax documentation 4. After you have collected the above documentation, you find out that Glenn filed an amended tax return for What additional documentation must you collect from Maggie and/or Glenn? Whose signature is required on each additional document? Verification: Lesson NASFAA

49 Verification Tracking Groups For each Verification Tracking Group, information items that must be verified are those that are not shaded in the chart below. Information That Must Be Verified V1 Standard Verification Tracking Group V4 Custom Verification Tracking Group V5 Aggregate Verification Tracking Group Income Information: Tax Filers Adjusted gross income (AGI) U.S. income taxes paid Untaxed portions of Individual Retirement Account (IRA) distributions Untaxed portions of pensions IRA deductions and payments Tax-exempt interest income Education tax credits (American Opportunity Tax Credit and Lifetime Learning Tax Credit) Income Information: Nontax Filers Income earned from work Number of Household Members Number of Household Members in College High School Completion Status Identity/Statement of Educational Purpose 2017 NASFAA Verification: Lesson 1 47

50 Verification: Lesson 1 IRS Request Type Submitted Form 4506-T If Form 4506-T was incomplete or inaccurate, IRS Form may be provided by the IRS See February 23, 2017 Electronic Announcement for more information. February 23, 2017 Electronic Announcement: Verification - IRS Documentation Requests, Uses, and Messaging IRS Document Requested Tax Return Transcript Tax Account Transcript Record of Account Wage & Income Transcript Tax Return Transcript Tax Account Transcript Record of Account Wage & Income Transcript Tax Return Transcript Tax Account Transcript Record of Account Wage & Income Transcript Tax Return Transcript Tax Account Transcript Record of Account Wage & Income Transcript Applicable tax year record on file with the IRS? Request for document to be sent to a 3 rd party*? IRS will send... Where mailed to? Yes No Transcript or Record To tax filer address on Line 3 of Form 4506-T Yes Yes Transcript or Record To 3 rd party address on Line 5 of Form 4506-T No No Transcript with indication that no record is found (this is acceptable documentation to verify nonfiling) No Yes Transcript with indication that no record is found (this is acceptable documentation to verify nonfiling) Verification of Nonfiling No No Verification of Nonfiling Letter To tax filer address on Line 3 of Form 4506-T To 3 rd party address on Line 5 of Form 4506-T To tax filer address on Line 3 of Form 4506-T To 3 rd party address on Line 5 of Form 4506-T To tax filer address on Line 3 of Form 4506-T When? Within 10 business days from when the IRS receives Form 4506-T. Within 10 business days from when the IRS receives Form 4506-T. Within 10 business days from when the IRS receives Form 4506-T. Within 10 business days from when the IRS receives Form 4506-T. Within 10 business days from when the IRS receives Form 4506-T. Within 10 business days from when the IRS receives Form 4506-T. Within 10 business days from when the IRS receives Form 4506-T. NASFAA U Self-Study Guide: Verification Verification of Nonfiling No Yes Verification of Nonfiling Letter Verification of Nonfiling Yes No Document indicating a tax return is on file (see February 23, 2017 Electronic Announcement) Verification of Nonfiling Yes Yes Document indicating a tax return is on file (see February 23, 2017 Electronic Announcement); to 3 rd party a message to contact the taxpayer To tax filer address on Line 3 of Form 4506-T & to 3 rd party using address on Line 5 of 4506-T Within 10 business days from when the IRS receives Form 4506-T.

51 Verification: Lesson 1 49 IRS Request Type Submitted Transcript Tollfree Note: A Record of Account, a Wage & Income Transcript, or Verification of Nonfiling are not available for request using the toll-free phone number. Get Transcript By Mail scripts Note: A Record of Account, a Wage & Income Transcript, or Verification of Nonfiling are not available for request using this process. Get Transcript Online scripts IRS Document Requested Tax Return Transcript Tax Account Transcript Tax Return Transcript Tax Account Transcript Tax Return Transcript Tax Account Transcript Tax Return Transcript Tax Account Transcript Tax Return Transcript Tax Account Transcript Record of Account Wage & Income Transcript Verification of Nonfiling Applicable tax year record on file with the IRS? Request for document to be sent to a 3 rd party*? IRS will send... Where mailed to? Yes N/A Transcript IRS Address of Record usually the address from the latest filed tax return No N/A Phone response that there Phone response is no 2015 tax return on file No response will be sent by mail. Yes N/A Transcript IRS Address of Record usually the address from the latest filed tax return No N/A Phone response that there is no 2015 tax return on file Yes, if 2015 tax year was presented as an option on previous screen. *A postsecondary institution is considered a 3 rd party for IRS documentation request purposes. N/A No response will be sent by mail. PDF of the requested document will be presented online for saving or printing Browser response Browser When? Within 10 business days from when the IRS receives Form 4506-T. Immediately Within10 business days from when the IRS receives Form 4506-T. Immediately Immediately NASFAA U Self-Study Guide: Verification

52 Documents Acceptable for Completing Verification The following chart details the verification documentation requirements related to the various data elements that may be selected for verification within one or multiple verification tracking groups for the award year. The specified tax year is 2015 when completing verification for the award year. Signatures on all verification documents are acceptable in the following formats: 1) wet that is, a handwritten original signature; 2) photocopied; 3) faxed; and 4) electronic, such as the use of a Personal Identification Number (PIN) that identifies and authenticates a particular person as the source of the signature. Data Element Verification Document Signature Requirement Comment Adjusted Gross Income (AGI) Tax Filers Unaltered information obtained through Internal Revenue Service (IRS) Data Retrieval Tool 1 Not applicable If student, spouse, or parent alters data after transfer from the IRS, tax transcript is required IRS Request Flag of 02 indicates there is unaltered tax data IRS Request Flag other than 02 means tax transcript is required IRS Tax Return Transcript that lists tax account information Taxpayer signature encouraged but not required To request copy of an IRS Tax Return Transcript, tax filer may: Use the Get Transcript Online tool on the IRS website and receive a copy in real time as a Portable Document Format (PDF) file, which may be submitted electronically to the school or printed as a hard copy; Use the Get Transcript by Mail option on the IRS website to submit a transcript request online and receive the transcript by mail; Call ; Mail or fax a paper request using IRS Form 4506-T or 4506T-EZ (available on IRS website); or Obtain IRS transcript from an Income Verification Express Service (IVES) participant for verification as long as they have no reason to question its authenticity Verification: Lesson NASFAA

53 Data Element Verification Document Acceptable Alternative IRS Tax Transcripts: IRS Record of Account Transcript; Return Transcript for Taxpayer (RTFTP); Tax Return DataBase View (TRDBV) transcript; or Other IRS tax transcript that includes all of the income and tax information required to be verified Note: IRS Tax Account Transcript or Information Returns Processing Transcript Request Wages (IRPTR-W) alone are not acceptable for federal verification Signature Requirement Taxpayer signature encouraged but not required Comment Adjusted Gross Income (AGI) Tax Filers (continued) If tax transcript does not contain all information needed to complete verification, school must request additional documents TRDBV is required to complete verification for individuals who are identified by the IRS as victims of identity theft TRDBV must be accompanied by a statement signed and dated by the tax filer indicating he or she is a victim of IRS tax-related identity theft and the IRS has been made aware of the tax-related identity theft TRDBV is obtained by calling IRS Identity Protection Specialized Unit (IPSU) at If tax filer cannot obtain TRDBV from IPSU, alternative tax transcript is acceptable; copy of tax return is not acceptable TRDPG is an online page view of the TRDBV and is also acceptable Considered equivalent to IRS Form 1040 Foreign income and tax data should be reported on FAFSA in U.S. dollars based on exchange rate at time FAFSA was signed Use line items most closely corresponding to IRS tax return If individual filed both a U.S. tax return and a foreign tax return, use only U.S. tax return for verification If individual did not pay taxes on earned foreign income, it is untaxed income Considered equivalent to IRS Form 1040A or 1040EZ Income and tax data already reported in U.S. dollars Use line items most closely corresponding to IRS tax return If individual did not pay taxes on earned income, it is untaxed income Foreign Tax Returns: Transcript from relevant taxing authority listing tax account information for the tax year, if transcript can be obtained at no cost Copy of tax return filed with taxing authority is only acceptable if tax filer cannot obtain free copy of transcript Puerto Rico, Northern Mariana Islands, Guam, American Samoa, or U.S. Virgin Islands Tax Returns: Transcript from relevant taxing authority listing tax account information for the tax year, if transcript can be obtained at no cost Copy of tax return filed with taxing authority is only acceptable if tax filer cannot obtain free copy of transcript Taxpayer signature encouraged but not required on transcript Taxpayer signature required on copy of tax return (only 1 if jointly filed) Taxpayer signature encouraged but not required on transcript Taxpayer signature required on copy of tax return (only 1 if jointly filed) 2017 NASFAA Verification: Lesson 1 51

54 Data Element Verification Document Signature Requirement Comment Adjusted Gross Income (AGI) Tax Filers (continued) Alternative Documentation for Limited Circumstances Only: Tax Extensions: IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Tax Return filed with IRS for the tax year; If applicable, IRS proof of unexpired extension beyond the 6-month automatic extension period; Copy of W-2 form or equivalent document for each source of employment income received for the tax year; If self-employed, a statement certifying the amount of AGI and taxes paid for the tax year; and A copy of the IRS Verification of Nonfiling Letter (or alternative IRS document with acceptable messaging, as noted under U.S. Individuals Not Required to File IRS Tax Returns below), or equivalent confirmation from non-u.s. taxing authority, dated on or after October 1, 2016 Statement must be signed Form 4868, W-2s, and Verification of Nonfiling Letter (or acceptable alternative IRS document) do not require signatures School may choose to request that applicant submit tax information using the IRS Data Retrieval Tool or a copy of tax transcript after the tax return has been filed If received, school must re-verify required data If taxpayer is unable to submit W-2 in timely manner, school may accept IRS Wage and Income Transcript or statement, signed by taxpayer certifying: Amount of income earned from work; Source of income; and Reason why W-2 is unavailable in a timely manner For an individual called up for active duty or for qualifying National Guard duty during a war or other military operation or national emergency, instead of IRS Form 4868, school must accept a signed statement from the individual certifying he or she has not filed a tax return or a request for a filing extension because of that military service Amended Tax Returns: Copy of IRS Tax Return Transcript or any other alternative IRS tax transcript containing all income and tax information from the original tax return required for verification; and Copy of IRS Form 1040X filed with IRS Taxpayer signature required on 1040X (only 1 if jointly filed) No signatures required on tax transcripts Acceptable only if amended tax return is filed with IRS Verification requires data from both original tax transcript and amended tax return Acceptable alternative tax transcripts are noted above Tax Account Transcript may be used in conjunction with Tax Account Transcript and 1040X Not acceptable: IRS Data Retrieval Tool data; or Copy of original tax return Verification: Lesson NASFAA

55 Data Element Verification Document Signature Requirement Comment Adjusted Gross Income (AGI) Tax Filers (continued) Government Cannot Locate Tax Account Information and Taxpayer Did Not Retain a Copy: Copies of all W-2 forms or equivalent documents for each source of employment; If self-employed, signed statement certifying AGI and taxes paid for tax year; Copy of a wage and tax statement, or signed statement, if individual filed a tax return with a territory, commonwealth, or foreign central government, certifying amount of AGI and taxes paid for tax year; Documentation from the IRS or other relevant taxing authority indicating the individual s tax account information cannot be located; and Signed statement indicating the individual did not retain a copy of his or her tax account information for the tax year Statement requires taxpayer s signature W-2s, wage and income statements, and taxing authority documents do not require signatures If U.S. taxpayer is unable to submit W- 2 in timely manner, school may accept IRS Wage and Income Transcript or written statement, signed by taxpayer certifying: Amount of income earned from work; Source of income; and Reason why W-2 is unavailable in a timely manner 2017 NASFAA Verification: Lesson 1 53

56 Data Element Verification Document Inability to Use IRS Data Retrieval or Obtain a Tax Return Transcript Following the Period After the IRS Processes Tax Returns for the Tax Year: For , alternative documentation included all of the following: Signed paper copy of 2015 tax return that was filed with the IRS; Signed statement from tax filer, on or attached to the tax return, certifying the tax return submitted to the school has the same data that was filed with the IRS; For tax filers who requested an IRS tax transcript using IRS Form 4506T-EZ or Form 4506-T, a copy of the IRS response that was mailed to the tax filer stating that the IRS could not provide the requested transcript; For tax filers who requested an IRS tax transcript using the IRS online transcript request process (Get Transcript Online or Get Transcript by Mail), a copy of the screen print from the official IRS Web page displaying a message indicating that the transcript request was unsuccessful; and A completed and signed IRS Form 4506T-EZ or Form 4506-T including on line 5 the name, address, and telephone number of the institution as the third party to whom the IRS is to mail the 2015 IRS tax transcript Signature Requirement Comment Adjusted Gross Income (AGI) Tax Filers (continued) Statement requires taxpayer s signature Copy of tax return requires signature of taxpayer (only 1 if jointly filed) or tax preparer If copy of tax return is signed by tax preparer, the preparer must provide his or her name and Social Security Number, Employer Identification Number (EIN), or Preparer Tax Identification Number (PTIN) IRS responses and screen prints must be signed and dated by the tax filer 4506-T and 4506T-EZ must be signed Alternative tax return documentation can be used only if the tax filer has requested a tax transcript from the IRS but is unable to obtain it Applicable only if ED announces it is acceptable for the award year ED announces if and when this alternative can be used by institutions each year For the award year, ED s Electronic Announcement wasn t published until October 18, 2016 This alternative cannot be used until ED publishes the annual announcement and instructions on what alternative documentation should be collected in addition to a copy of the signed tax return Until that time, a tax transcript is required to complete verification If a tax return is filed late, the tax payer must still wait until adequate time is allowed to process the tax return (usually 4 to 6 weeks) before requesting the tax transcript Failure to successfully register for Get Transcript Online process is not a sufficient reason to accept a paper tax return or alternative documentation Tax filer will need to request a tax transcript by mail using the Get Transcript by Mail option or by using the paper 4506-T or 4506T- EZ and provide documentation from the IRS that the tax transcript is unavailable does not provide written confirmation that the transcript request failed, so the tax filer must use the transcript by mail or paper Form 4506T-EZ or 4506-T for written confirmation If the institution questions the accuracy of the paper tax return, it must submit the IRS Form 4506T-EZ or 4506-T to the IRS and wait for the IRS to return the tax transcript or confirmation that a transcript is unavailable for that tax filer Verification: Lesson NASFAA

57 Data Element Verification Document Signature Requirement Comment Adjusted Gross Income (AGI) Tax Filers (continued) Separating Income on Joint Tax Returns Obtain a copy (as appropriate) of the applicant s, spouse s, or parent s: IRS Tax Return Transcript or alternative tax transcript, or tax transcript from other relevant taxing authority, that lists tax account information for the tax year; A W-2 or equivalent document from each source of employment; and If a W-2 is unavailable, or a self-employed individual does not have a W-2, a signed statement certifying the amount of earned income Signature required for income certification Neither the tax transcript, nor the W-2 forms require signatures Step 1: To determine the appropriate AGI, start with the income figure from the individual s W-2 and identify income from the joint return that represents the individual s personal income Income earned on jointly-owned accounts, investments, businesses, or farms should be assessed at 50% Losses on jointly-owned businesses, farms, or investments should be assessed at 50% If AGI listed on the joint return was adjusted ( Adjustment to Income ), the institution should reduce the individual s AGI by the amount or a proportion of the adjustment that applies to the individual Step 2: To figure taxes paid on an individual s AGI, the institution may use either of the following methods: Tax Table Method (preferred): Institution uses the IRS Tax Table or Tax Rate Schedule for the appropriate year to calculate the amount of tax that would have been paid if a separate tax return had been filed; or Proportional Distribution Method: Institution determines the percentage of the joint AGI attributable to each individual, and then assesses the joint tax paid at the same percentage 2017 NASFAA Verification: Lesson 1 55

58 Data Element Verification Document Signature Requirement Comment Income Earned from Work Nontax Filers U.S. Individuals Not Required to File IRS Tax Returns: Verification worksheet or written statement from each nonfiler certifying for the tax year: Individual has not filed and is not required to file an income tax return, Sources of income earned from work, and Amount of income from each source; Copy of a W-2 or equivalent document for each source of employment income; and IRS Verification of Nonfiling Letter or acceptable alternative IRS document with proper messaging dated on or after October 1, 2016 Nonfiler s signature is required on worksheets and/or statements W-2s and IRS Verification of Nonfiling Letter (or acceptable alternative IRS document) do not require signatures If U.S. taxpayer is unable to submit W- 2 in a timely manner, school may accept IRS Wage and Income Transcript or written statement, signed by the taxpayer certifying: Amount of income earned from work; Source of income; and Reason why W-2 is unavailable in a timely manner IRS Verification of Nonfiling Letter: May be requested using IRS Get Transcript Online tool, or by submitting IRS Form 4506-T and checking box 7 Must be submitted for student, independent student s spouse, and each parent on the FAFSA, if the individual did not file taxes and the student is selected for verification Acceptable alternatives to IRS Verification of Nonfiling Letter include, but are not limited to: IRS Tax Return Transcript or Tax Account Transcript indicating no record of return filed or no transcript on file for the tax year; Any version of IRS Form clearly stating it is provided as verification of nonfiling, or stating IRS has no record of a tax return for the tax year; or Any other IRS document if it clearly indicates IRS does not have a tax return record from the individual for the tax year Tax transcripts or other IRS documents indicating request could not be processed or request could not be honored are not acceptable See below for Verification of Nonfiling Letter alternatives for individuals who are not U.S. citizens or residents, including spouses or parents of dependent students living in other countries Verification: Lesson NASFAA

59 Data Element Verification Document Signature Requirement Comment Income Earned from Work Nontax Filers Residents of Foreign Countries, Puerto Rico, Northern Mariana Islands, Guam, American Samoa, U.S. Virgin Islands, Republic of the Marshall Islands, Federated States of Micronesia, and Republic of Palau Not Required to File Tax Returns: Copy of taxpayer s Wage and Tax Statement or equivalent document from each employer for the tax year; Verification worksheet or written statement for the tax year: Indicating the individual has not filed and is not required to file a tax return, Identifying all sources and amounts of all income and taxes paid, and Verification of Nonfiling Letter from relevant taxing authority dated on or after October 1, 2016 Nonfiler s signature required on worksheets and/or written statements Wage and Tax Statement or equivalent document, and Verification of Nonfiling Letter from tax authority do not require signatures U.S. territories are Guam, American Samoa, and U.S. Virgin Islands U.S. commonwealths are Puerto Rico and Northern Mariana Islands Freely Associated States are Republic of the Marshall Islands, Federated States of Micronesia, and Republic of Palau If individual did not pay taxes on earned income, it is untaxed income An individual without a Social Security Number (SSN), an Individual Taxpayer Identification Number (ITIN), or an Employer Identification Number (EIN), is unable to obtain a Verification of Nonfiling Letter from the IRS and, therefore, must submit: Signed and dated statement certifying the individual does not have a SSN, ITIN, or EIN, and listing the sources and amounts of earnings, other income, and resources received for the tax year; and If applicable, a copy of a W 2 or equivalent document for each source of employment income received for the tax year If living in another country and unable to provide a Verification of Nonfiling Letter, the individual also must provide proof of that taxing authority s filing requirements, whether obtained directly from the taxing authority or from the taxing authority's website If such documentation does not exist, or if unable to obtain it, individual may provide a signed and dated statement indicating either that taxing authority does not provide such documentation or that individual was unable to obtain the documentation after contacting the taxing authority U.S. Income Tax Paid Tax Filers See AGI See AGI See AGI 2017 NASFAA Verification: Lesson 1 57

60 Data Element Verification Document Signature Requirement Comment Untaxed Income on Tax Returns Tax Filers Untaxed Portions of Individual Retirement Account (IRA) Distributions Unaltered information obtained through IRS Data Retrieval Tool IRS Tax Return Transcript that lists tax account information, including alternative IRS tax transcripts indicated under AGI See AGI See AGI IRA Deductions and Payments Unaltered information obtained through IRS Data Retrieval Tool IRS Tax Return Transcript that lists tax account information, including alternative IRS tax transcripts indicated under AGI See AGI See AGI Untaxed Portions of Pension and Annuity Distributions Unaltered information obtained through IRS Data Retrieval Tool IRS Tax Return Transcript that lists tax account information, including alternative IRS tax transcripts indicated under AGI See AGI See AGI Tax-Exempt Interest Income Unaltered information obtained through IRS Data Retrieval Tool See AGI See AGI IRS Tax Return Transcript that lists tax account information, including alternative IRS tax transcripts indicated under AGI Education Tax Credits Unaltered information obtained through IRS Data Retrieval Tool IRS Tax Return Transcript that lists tax account information, including alternative IRS tax transcripts indicated under AGI See AGI See AGI Includes American Opportunity Tax Credit and Lifetime Learning Tax Credit Verification: Lesson NASFAA

61 Data Element Verification Document Other FAFSA Information Subject to Verification Number of Household Members (Household Size) Number of Household Members in College Verification worksheet or written statement listing: Names and ages of all household members; and Relationship of each to the student School may request applicant to provide additional documentation beyond the above Additional documentation is determined by institution Verification worksheet or written statement listing: Name and age of each household member who is or will be enrolled at least half-time in a postsecondary educational institution during the award year; and Name of the postsecondary institution in which each individual is or will be enrolled If institution has reason to believe the above information is inaccurate, it must obtain documentation of enrollment from the school listed on the worksheet or statement If the individual is not yet enrolled for the award year, the institution may accept alternative documentation, such as a letter of admission or enrolment records from the postsecondary institution the individual plans to attend If the individual is enrolled at the same institution as the applicant, the institution can verify enrollment from its own records Signature Requirement Worksheet or statement must have student s and, if dependent, at least 1 parent s signature Worksheet or statement must have student s and, if dependent, at least 1 parent s signature Comment For dependent student, verification not required if household size on ISIR is: 2 and parent is single, separated, divorced, or widowed; or 3 and parents are married or unmarried and living together For independent student, verification not required if household size on ISIR is: 1 and applicant is single, separated, divorced, or widowed; or 2 if applicant is married Individual must be enrolled in a degree, certificate, or other program leading to a recognized educational credential at a Title IV-eligible institution Individuals may not be included if enrolled in U.S. military academies Parents cannot automatically be included, but financial aid administrators have the ability to exercise professional judgment (PJ) to include a parent under unusual circumstances and with proper documentation 2017 NASFAA Verification: Lesson 1 59

62 Data Element Verification Document Signature Requirement Comment High School Completion Status Student must provide one of the following documents indicating high school completion status: Copy of a high school diploma; Copy of a final, official high school transcript showing the date when the diploma was awarded (not some date in the future); Copy of DD Form 214, Certificate of Release or Discharge from Active Duty, if it indicates student has a high school diploma or its equivalent; Copy of the secondary school leaving certificate (or other similar document) for a student who completed a secondary education in a foreign country and is unable to obtain a copy of his or her high school diploma or transcript; Copy of a General Educational Development (GED) certificate or GED transcript; State certificate received by a student after passing a state-authorized examination the state recognizes as the equivalent of a high school diploma [e.g. the High School Equivalency Test (HiSET) and the Test Assessing Secondary Completion (TASC)]; No signature requirements, except as noted for home schooling and for refugees, asylees, and victims of human trafficking If institution has already received one of these documents as part of the admissions or any other process, it does not need to request another If school successfully verified and documented the applicant s high school completion status for a prior award year, verification of high school completion is not required for subsequent years Successful completion of a two-year program acceptable for full credit toward a baccalaureate degree can include: Completion of an associate degree; Completion of at least 60 semester/trimester or 72 quarter credit hours that does not result in the awarding of an associate degree, but is acceptable for full credit toward a baccalaureate degree at any institution; or Enrollment in a baccalaureate degree program where at least 60 semester/trimester or 72 quarter credit hours have been successfully completed, including credit hours transferred into the baccalaureate degree program A student who completed high school in a foreign country can obtain a high school diploma, secondary school leaving certificate, or equivalent document from the foreign high school, the Ministry of Education in the foreign country, or that country s consulate in the U.S. Schools with expertise to evaluate foreign secondary school credentials to determine their equivalence to U.S. high school diplomas may do so Otherwise, they may need to use a third-party foreign diploma evaluation service for this purpose Verification: Lesson NASFAA

63 Data Element Verification Document Signature Requirement Comment High School Completion Status (continued) Test transcript received by a student after passing a state-authorized examination the state recognizes as the equivalent of a high school diploma (e.g. HiSET, TASC) if it specifically indicates that the state has determined the test results meet its high school equivalency requirements, or includes language indicating the final score is a passing score; Academic transcript indicating the student successfully completed at least a two-year program or at least two years worth of postsecondary coursework that is acceptable for full credit toward a baccalaureate degree; Copy of a secondary school completion credential for home school (other than a high school diploma or its recognized equivalent) if state law requires home schooled students to obtain that credential; Transcript or the equivalent, signed by the parent or guardian of a home schooled student, listing the secondary school courses the student completed and documents the successful completion of a secondary school education in a home school setting; School may accept alternative documentation (as determined by the institution) to verify high school completion status in cases where documentation of secondary school completion is unavailable, such as: Applicant s secondary school is closed and information is not available from another source, such as the local school district or a state department of education; Applicant s parent(s) or guardian(s) who provided his or her home schooling is deceased; or Applicant is a refugee, an asylee, or a victim of human trafficking An applicant who is a refugee, an asylee, or a victim of human trafficking and who cannot obtain a foreign high school diploma or secondary school leaving certificate (or similar document), must submit: Proof of his or her attempt to obtain documentation of completion of a secondary school education in a foreign country (i.e., a copy of or letter along with proof of mailing); Signed and dated statement indicating the applicant completed his or her secondary school education in a foreign country, the name and address of the foreign high school where the applicant completed the secondary school education, and the date when the foreign high school diploma was awarded; and Copy of the entry status documentation identifying the applicant s current or prior status as a refugee, an asylee, or as a victim of human trafficking and who entered the U.S. after the age of NASFAA Verification: Lesson 1 61

64 Data Element Verification Document Signature Requirement Comment High School Completion Status (continued) For a student who did not complete high school but excelled academically in high school, documentation that student: Excelled in high school, Met the postsecondary school s formalized, written procedures for admitting such students, and Is enrolled in at least an associate degree program or its equivalent; Documentation of student s qualification for enrollment as a regular student under the ability-to-benefit (ATB) provisions; or For a student enrolled in an "eligible career pathway program," documentation that student passed an approved ATB test or completed at least 6 credit hours or 225 clock hours applicable toward a degree or certificate offered by the school Verification: Lesson NASFAA

65 Data Element Verification Document Signature Requirement Comment Other FAFSA Information Subject to Verification (continued) Student s Identity and Statement of Educational Purpose Student should appear in person at the school and present a valid, unexpired government-issued photo identification (ID) such as: Passport; Driver s license; Non-driver s identification; or Other state-issued ID School must maintain an annotated copy of the presented identification that includes the: Date the ID was received; and Name of the authorized school official receiving it Student must also sign a Statement of Educational Purpose certifying: Who he or she is; and That any federal student aid received will only be used for educational purposes and for the costs of attending the school for the award year Statement must be signed by applicant in the presence of the authorized school official Schools must use exact language provided by the U.S. Department of Education (ED) for the Statement of Educational Purpose If unable to appear in person at the school, the student must sign and submit the Statement of Educational Purpose, and must submit a copy of his or her ID with the statement signed by a notary public confirming that the student appeared before the notary public and presented the ID confirming his or her identity Statement of Educational Purpose and ID must be presented at the same time (whether in-person to the school or to a notary public) Government-issued ID cannot be a: Student ID issued by a state school; or Military ID (federal law prohibits photocopying military IDs) Must re-verify this information for each award year for which this data is selected for verification 1 Under the Higher Education Relief Opportunities for Students (HEROES) Act of 2003, a school may accept in lieu of a student s or parent s tax return: (1) a statement from the individual certifying that he or she has not filed and was not required to file an income tax return, or a request for a filing extension because he or she was called up for active duty or for qualifying National Guard duty during a war or other military operation or national emergency; and (2) a copy of each W-2 received for the specified year, or a signed statement certifying the amount of AGI for the specified year if the individual was self-employed. This provision extends all waivers and modifications under this act to September 30, NASFAA Verification: Lesson 1 63

66 Suggested Verification Text Verification of 2015 Income Information for Student Tax Filers Important Note: The instructions below apply to the student and spouse, if the student is married. Notify the financial aid office if the student or spouse filed separate IRS income tax returns for 2015 or had a change in marital status after December 31, Instructions: Complete this section if the student and spouse filed or will file a 2015 IRS income tax return(s). The best way to verify income is by using the IRS Data Retrieval Tool (IRS DRT) that is part of FAFSA on the Web at FAFSA.gov. In most cases, no further documentation is needed to verify 2015 income information that was transferred into the student s FAFSA using the IRS DRT if that information was not changed by the FAFSA filer. Check the box that applies: The student has used the IRS DRT in FAFSA on the Web to transfer 2015 IRS income tax return information into the student s FAFSA. The student has not yet used the IRS DRT in FAFSA on the Web, but will use the tool to transfer 2015 IRS income tax return information into the student s FAFSA. The student is unable or chooses not to use the IRS DRT in FAFSA on the Web, and instead will provide the school with a 2015 IRS Tax Return Transcript(s). A 2015 IRS Tax Return Transcript may be obtained through: Get Transcript by MAIL Go to under the Tools heading, click "Get a tax transcript. Click Get Transcript by MAIL. Make sure to request the IRS Tax Return Transcript and NOT the IRS Tax Account Transcript. Get Transcript ONLINE Go to under the Tools heading, click "Get a tax transcript." Click Get Transcript ONLINE. Make sure to request the IRS Tax Return Transcript and NOT the IRS Tax Account Transcript. Automated Telephone Request Paper Request Form IRS Form 4506T-EZ or IRS Form 4506-T In most cases, for electronic tax return filers, 2015 IRS income tax return information is available for the IRS DRT or the IRS Tax Return Transcript within 2 3 weeks after the 2015 electronic IRS income tax return has been accepted by the IRS. Generally, for filers of 2015 paper IRS income tax returns, the 2015 IRS income tax return information is available for the IRS DRT or the IRS Tax Return Transcript within 6 8 weeks after the 2015 paper IRS income tax return has been received by the IRS. Contact the financial aid office if more information is needed about using the IRS DRT or obtaining an IRS Tax Return Transcript. If the student and spouse filed separate 2015 IRS income tax returns, the IRS DRT cannot be used and the 2015 IRS Tax Return Transcript(s) must be provided for each. Check here if a 2015 IRS Tax Return Transcript(s) is provided. Check here if a 2015 IRS Tax Return Transcript(s) will be provided later Verification: Lesson 1

67 Suggested Verification Text Verification of 2015 Income Information for Parent Tax Filers Important Note: The instructions below apply to each parent included in the household. Notify the financial aid office if the parents filed separate IRS income tax returns for 2015 or had a change in marital status after December 31, Instructions: Complete this section if the parents filed or will file a 2015 IRS income tax return(s). The best way to verify income is by using the IRS Data Retrieval Tool (IRS DRT) that is part of FAFSA on the Web at FAFSA.gov. In most cases, no further documentation is needed to verify 2015 income information that was transferred into the student s FAFSA using the IRS DRT if that information was not changed by the FAFSA filer. Check the box that applies: The parents have used the IRS DRT in FAFSA on the Web to transfer 2015 IRS income tax return information into the student s FAFSA. The parents have not yet used the IRS DRT in FAFSA on the Web, but will use the tool to transfer 2015 IRS income tax return information into the student's FAFSA. The parents are unable or choose not to use the IRS DRT in FAFSA on the Web, and instead will provide the school with a 2015 IRS Tax Return Transcript(s). A 2015 IRS Tax Return Transcript may be obtained through: Get Transcript by MAIL Go to under the Tools heading, click "Get a tax transcript. Click Get Transcript by MAIL. Make sure to request the IRS Tax Return Transcript and NOT the IRS Tax Account Transcript. Get Transcript ONLINE Go to under the Tools heading, click "Get a tax transcript." Click Get Transcript ONLINE. Make sure to request the IRS Tax Return Transcript and NOT the IRS Tax Account Transcript. Automated Telephone Request Paper Request Form IRS Form 4506T-EZ or IRS Form 4506-T In most cases, for electronic tax return filers, 2015 IRS income tax return information is available for the IRS DRT or the IRS Tax Return Transcript within 2 3 weeks after the 2015 electronic IRS income tax return has been accepted by the IRS. Generally, for filers of 2015 paper IRS income tax returns, the 2015 IRS income tax return information is available for the IRS DRT or the IRS Tax Return Transcript within 6 8 weeks after the 2015 paper IRS income tax return has been received by the IRS. Contact the financial aid office if more information is needed about using the IRS DRT or obtaining an IRS Tax Return Transcript. If the parents filed separate 2015 IRS income tax returns, the IRS DRT cannot be used and the 2015 IRS Tax Return Transcript(s) must be provided for each. Check here if a 2015 IRS Tax Return Transcript(s) is provided. Check here if a 2015 IRS Tax Return Transcript(s) will be provided later Verification: Lesson 1 65

68 Suggested Verification Text Verification of 2015 Income Information for Individuals with Unusual Circumstances Individuals Granted a Filing Extension by the IRS An individual who is required to file a 2015 IRS income tax return and has been granted a filing extension by the IRS, must provide: A copy of IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, that was filed with the IRS for tax year 2015; A copy of the IRS's approval of an extension beyond the automatic six-month extension if the individual requested an additional extension of the filing time for tax year 2015; Verification of Non-filing Letter (confirmation that the tax return has not yet been filed) from the IRS or other relevant tax authority dated on or after October 1, 2016; A copy of IRS Form W 2 for each source of employment income received for tax year 2015 and, If self-employed, a signed statement certifying the amount of the individual s Adjusted Gross Income (AGI) and the U.S. income tax paid for tax year Individuals Who Filed an Amended IRS Income Tax Return An individual who filed an amended IRS income tax return for tax year 2015 must provide: A 2015 IRS Tax Return Transcript (that will only include information from the original tax return and does not have to be signed), or any other IRS tax transcript(s) that includes all of the income and tax information required to be verified; and A signed copy of the 2015 IRS Form 1040X, Amended U.S. Individual Income Tax Return, that was filed with the IRS. Individuals Who Were Victims of IRS Tax-Related Identity Theft An individual who was the victim of IRS tax-related identity theft must provide: A Tax Return DataBase View (TRDBV) transcript obtained from the IRS, or any other IRS tax transcript(s) that includes all of the income and tax information required to be verified; and A statement signed and dated by the tax filer indicating that he or she was a victim of IRS tax-related identity theft and that the IRS is aware of the tax-related identity theft Verification: Lesson 1

69 Individuals Who Filed Non-IRS Income Tax Returns A tax filer who filed an income tax return with Guam, the Commonwealth of the Northern Mariana Islands, the Commonwealth of Puerto Rico and the U.S. Virgin Islands may provide a signed copy of his or her income tax return that was filed with the relevant tax authority. However, if we question the accuracy of the information on the signed copy of the income tax return, the tax filer must provide us with a copy of the tax account information issued by the relevant tax authority before verification can be completed. A tax filer who filed an income tax return with the tax authority for American Samoa must provide a copy of his or her tax account information. A tax filer who filed an income tax return with tax authorities not mentioned above, i.e. a foreign tax authority, and who indicates that he or she is unable to obtain the tax account information free of charge, must provide documentation that the tax authority charges a fee to obtain that information, along with a signed copy of his or her income tax return that was filed with the relevant tax authority Verification: Lesson 1 67

70 Suggested Verification Text Verification of 2015 Income Information for Student Nontax Filers The instructions and certifications below apply to the student and spouse, if the student is married. Complete this section if the student and spouse will not file and are not required to file a 2015 income tax return with the IRS. Check the box that applies: The student and spouse were not employed and had no income earned from work in The student and/or spouse were employed in 2015 and have listed below the names of all employers, the amount earned from each employer in 2015, and whether an IRS W-2 form is provided. [Provide copies of all 2015 IRS W-2 forms issued to the student and spouse by their employers]. List every employer even if the employer did not issue an IRS W-2 form. If more space is needed, provide a separate page with the student s name and ID number at the top. Employer s Name IRS W-2 Annual Amount Provided? Earned in 2015 (Example) ABC s Auto Body Shop Yes $4, Total Amount of Income Earned From Work $ Provide documentation from the IRS or other relevant tax authority dated on or after October 1, 2016 that indicates a 2015 IRS income tax return was not filed with the IRS or other relevant tax authority. Check here if confirmation of nonfiling is provided. Check here if confirmation of nonfiling will be provided later Verification: Lesson 1

71 Suggested Verification Text Verification of 2015 Income Information for Parent Nontax Filers The instructions and certifications below apply to each parent included in the household. Complete this section if the parents will not file and are not required to file a 2015 income tax return with the IRS. Check the box that applies: Neither parent was employed, and neither had income earned from work in One or both parents were employed in 2015 and have listed below the names of all employers, the amount earned from each employer in 2015, and whether an IRS W-2 form is provided. [Provide copies of all 2015 IRS W-2 forms issued to the parents by their employers]. List every employer even if the employer did not issue an IRS W-2 form. If more space is needed, provide a separate page with the student s name and ID number at the top. Employer s Name IRS W-2 Annual Amount Provided? Earned in 2015 (Example) ABC s Auto Body Shop Yes $4, Total Amount of Income Earned From Work $ Provide documentation from the IRS or other relevant tax authority dated on or after October 1, 2016 that indicates a 2015 IRS income tax return was not filed with the IRS or other relevant tax authority. Check here if confirmation of nonfiling is provided. Check here if confirmation of nonfiling will be provided later Verification: Lesson 1 69

72 Suggested Verification Text Number of Household Members and Number in College (Independent Student) Number of Household Members: List below the people in the student s household. Include: The student. The student s spouse, if the student is married. The student s or spouse s children if the student or spouse will provide more than half of the children s support from July 1, 2017, through June 30, 2018, even if a child does not live with the student. Other people if they now live with the student and the student or spouse provides more than half of the other person s support, and will continue to provide more than half of that person s support through June 30, Number in College: Include in the space below information about any household member who is, or will be, enrolled at least half time in a degree, diploma, or certificate program at an eligible postsecondary educational institution any time between July 1, 2017, and June 30, 2018, and include the name of the college. If more space is needed, provide a separate page with the student s name and ID number at the top. Full Name Age Relationship College Will be Enrolled at Least Half Time (Yes or No) Self Note: We may require additional documentation if we have reason to believe that the information regarding the household members enrolled in eligible postsecondary educational institutions is inaccurate Verification: Lesson 1

73 Suggested Verification Text Number of Household Members and Number in College (Dependent Student) Number of Household Members: List below the people in the parents household. Include: The student. The parents (including a stepparent) even if the student doesn t live with the parents. The parents other children if the parents will provide more than half of the children s support from July 1, 2017, through June 30, 2018, or if the other children would be required to provide parental information if they were completing a FAFSA for Include children who meet either of these standards, even if a child does not live with the parents. Other people if they now live with the parents and the parents provide more than half of the other person s support, and will continue to provide more than half of that person s support through June 30, Number in College: Include in the space below information about any household member who is, or will be, enrolled at least half time in a degree, diploma, or certificate program at an eligible postsecondary educational institution any time between July 1, 2017, and June 30, 2018, and include the name of the college. If more space is needed, provide a separate page with the student s name and ID number at the top. Full Name Age Relationship College Will be Enrolled at Least Half Time (Yes or No) Self Note: We may require additional documentation if we have reason to believe that the information regarding the household members enrolled in eligible postsecondary educational institutions is inaccurate Verification: Lesson 1 71

74 Suggested Verification Text High School Completion Status Provide one of the following documents to indicate the student s high school completion status when the student begins college in : A copy of the student s high school diploma. For students who completed secondary education in a foreign country, a copy of the secondary school leaving certificate or other similar document. A copy of the student s final official high school transcript that shows the date when the diploma was awarded. A state certificate or transcript received by a student after the student passed a State-authorized examination that the State recognizes as the equivalent of a high school diploma (GED test, HiSET, TASC, or other State-authorized examination). 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. For a student who was homeschooled in a state where state law requires the student to obtain a secondary school completion credential for homeschooling (other than a high school diploma or its recognized equivalent), a copy of that credential. For a student who was homeschooled in a state where state law does not require the student to obtain a secondary school completion credential for homeschooling (other than a high school diploma or its recognized equivalent), a transcript, or the equivalent, signed by the student's parent or guardian, that lists the secondary school courses the student completed and includes a statement that the student successfully completed a secondary school education in a homeschool setting. A student who is unable to obtain the documentation listed above must contact the financial aid office Verification: Lesson 1

75 Required Verification Text (Note: Institutions must use the exact language in the Statement of Educational Purpose as provided below) Identity and Statement of Educational Purpose (To Be Signed at the Institution) The student must appear in person at to (Name of Postsecondary Educational Institution) verify his or her identity by presenting an unexpired valid government-issued photo identification (ID), such as, but not limited to, a driver s license, other state-issued ID, or passport. The institution will maintain a copy of the student s photo ID that is annotated by the institution with the date it was received and reviewed, and the name of the official at the institution authorized to receive and review the student s ID. In addition, the student must sign, in the presence of the institutional official, the Statement of Educational Purpose provided below. Identity and Statement of Educational Purpose (To Be Signed in the Presence of a Notary) If the student is unable to appear in person at (Name of Postsecondary Educational Institution) to verify his or her identity, the student must provide to the institution: (a) A copy of the unexpired valid government-issued photo identification (ID) that is acknowledged in the notary statement below, or that is presented to a notary, such as, but not limited to, a driver s license, other state-issued ID, or passport; and (b) The original Statement of Educational Purpose provided below, which must be notarized. If the notary statement appears on a separate page than the Statement of Educational Purpose, there must be a clear indication that the Statement of Educational Purpose was the document notarized. Statement of Educational Purpose I certify that I am the individual signing (Print Student s Name) this Statement of Educational Purpose and that the Federal student financial assistance I may receive will only be used for educational purposes and to pay the cost of attending for (Name of Postsecondary Educational Institution) (Student s Signature) (Date) (Student s ID Number) Verification: Lesson 1 73

76 Texto de verificación requerida para (Nota: Las instituciones deben utilizar el lenguaje exacto en la Declaración de Propósito Educativo que se presenta a continuación) Verificación de Identidad y Declaración de Propósito Educativo (Para ser firmadas en la institución) El estudiante debe comparecer en persona en para (Nombre de la institución educativa postsecundaria) verificar su identidad mediante la presentación de una identificación con fotografía (ID) válida emitida por el gobierno que no haya expirado, como una licencia de conducir, otro tipo de identificación emitida por el estado o pasaporte, entre otros. La institución conservará una copia de la identificación con fotografía del estudiante en la cual se anotará la fecha en la que se recibió y revisó, y el nombre del funcionario de la institución autorizado a recibir y revisar las identificaciones de los estudiantes. Además, el estudiante debe firmar, en presencia del funcionario de la institución, la Declaración de Propósito Educativo proporcionada a continuación. Verificación de Identidad y Declaración de Propósito Educativo (Para ser firmadas en presencia de un notario) Si el estudiante no es capaz de comparecer en persona en (Nombre de la institución educativa postsecundaria) para verificar su identidad, el mismo debe proporcionar a la institución: (a) una copia de la de identificación con fotografía (ID) válida emitida por el gobierno que no haya expirado, que se reconoce en la declaración del notario que aparece a continuación, o que se presenta ante un notario, como una licencia de conducir, otro tipo de identificación emitida por el estado o pasaporte, entre otros; y (b) la Declaración de Propósito Educativo original proporcionada a continuación debe ser notarizada. Si la declaración del notario aparece en una página separada de la Declaración de Propósito Educativo, se debe indicar de manera clara que la Declaración de Propósito Educativo era el documento notarizado. Declaración de Propósito Educativo Certifico que yo,, soy el individuo que firma esta [Imprimir nombre del estudiante] Declaración de Propósito Educativo, y que la ayuda financiera federal estudiantil que yo pueda recibir sólo será utilizada para fines educativos y para pagar el costo de asistir a para [Imprimir nombre de institución educativa postsecundaria] [Firma del estudiante] [Fecha] [Número de identificación del estudiante] Verification: Lesson 1

77 Suggested Verification Text Sample of a Notary s Certificate of Acknowledgement Notary s certification may vary by State State of City/County of On, before me,, (Date) (Notary s name) personally appeared,, and proved to me (Printed name of signer) on the basis of satisfactory evidence of identification (Type of unexpired government-issued photo ID provided) to be the above-named person who signed the foregoing instrument. WITNESS my hand and official seal (seal) My commission expires on (Date) (Notary signature) Verification: Lesson 1 75

78 Suggested Verification Text Certification and Signature (Independent Student) Certification and Signature Each person signing below certifies that all of the information reported is complete and correct. WARNING: If you purposely give false or misleading information, you may be fined, sent to prison, or both. Print Student s Name Student s Signature (Required) Spouse s Signature (Optional) Student s ID Number Date Date Verification: Lesson 1

79 Suggested Verification Text Certifications and Signatures (Dependent Student) Certifications and Signatures Each person signing below certifies that all of the information reported is complete and correct. The student and one parent whose information was reported on the FAFSA must sign and date. WARNING: If you purposely give false or misleading information, you may be fined, sent to prison, or both. Print Student s Name Student s Signature Parent s Signature Student s ID Number Date Date Verification: Lesson 1 77

80 DEPENDENT STUDENT VERIFICATION WORKSHEET (NASFAA sample) Your Free Application for Federal Student Aid (FAFSA) was selected for review in a process called verification. The law says that before awarding federal student aid, we may ask you to confirm the information you reported on your FAFSA using this worksheet and other required documents. If there are differences, your FAFSA information may need to be corrected. You and any parent whose information was reported on the FAFSA must complete and sign this worksheet, attach any required documents, and submit them to us. We may ask for additional information. If you have questions about verification, contact us as soon as possible so that your financial aid will not be delayed. Please complete the sections of this form according to the Verification Group marked with a below: V1 Standard Complete sections 1, 2, 3A, 3B and/or 3C, and 5 V4 Custom Complete sections 1, 4, 5, and Identity and Statement of Educational Purpose V5 Aggregate Complete sections 1, 2, 3A, 3B and/or 3C, 4, 5, and Identity and Statement of Educational Purpose 1. Student Information Name: Address: City, State Zip: Student ID Number: Date of Birth: Phone Number: Alternate Phone Number: 2. Household Information List the people in your parents household. Include: Yourself, even if you do not live with your parents. Your children, if they will receive more than half of their support from your parents from July 1, 2017 through June 30, Your parents. Do not include a parent who is not living in the household due to separation, divorce, or death. Your parents other children if they will receive more than half of their support from your parents from July 1, 2017 through June 30, Includes graduate students, but not children for whom child support is paid or foster children supported by another entity. Your unborn child and/or your parent s unborn child, if that child will be born before June 30, 2018, and your parents will provide more than half of the child s support from the projected date of birth through June 30, Other people, if they live with and receive more than half of their support from your parents at the time of application and will continue to receive more than half of their support from July 1, 2017 through June 30, If you need more space, please attach a separate page with the student s name and ID at the top. Full Name Age Relationship College During Self Verification: Lesson 1

81 3A. Tax Forms and Income Information All tax filers must submit a copy of their 2015 IRS Tax Return Transcript unless they have transferred their 2015 income tax return information into the FAFSA using the IRS Data Retrieval Tool (IRS DRT) and have not subsequently changed that information. Please DO NOT submit copies of your 2015 federal 1040, 1040A, or 1040EZ tax returns, any IRS schedules (A, B, C, etc.), or state tax returns. If either the student or a parent did not and will not file a 2015 federal tax return, that individual(s) should go to Section 3C. 3B. Verification of 2015 IRS Income Tax Return Information for Tax Filers The student has used the IRS DRT in FAFSA on the Web to transfer 2015 IRS income tax return information into the student s FAFSA. The parent has used the IRS DRT in FAFSA on the Web to transfer 2015 IRS income tax return information into the student s FAFSA. The student is unable or chooses not to use the IRS DRT in FAFSA on the Web, and instead will provide the school a 2015 IRS Tax Return Transcript. The parent is unable or chooses not to use the IRS DRT in FAFSA on the Web, and instead will provide the school a 2015 IRS Tax Return Transcript. The student has not yet used the IRS DRT in FAFSA on the Web, but will use the tool to transfer 2015 IRS income tax return information into the student s FAFSA once the 2015 IRS income tax return has been filed. The parent has not yet used the IRS DRT in FAFSA on the Web, but will use the tool to transfer 2015 IRS income tax return information into the student s FAFSA once the 2015 IRS income tax return has been filed. Directions for using the IRS Data Retrieval Tool (IRS DRT) or requesting a Tax Return Transcript *The IRS DRT is available in the Financial Information sections of the student s FAFSA. Go to and, under Returning User, select Login. After you have logged in, select Make FAFSA Corrections. Click the Financial Information tab. You will have the option to use the IRS DRT as long as you (student) or your parent has Already Completed an IRS income tax return (select Already Completed from the drop-down box). You cannot use IRS DRT if you filed your tax return electronically within the past 3 weeks or by paper within the past 11 weeks. Once you use the IRS DRT for the student and/or parent, select the Sign & Submit tab. The FAFSA must be signed electronically with the student s and parent s Federal Student Aid ID (FSA ID) and resubmitted for processing. If you have any trouble with this process, feel free to call the Financial Aid Office for help. ** To obtain a 2015 IRS Tax Return Transcript, go to and click on the Get Transcript Online or Get Transcript by Mail link. Make sure to request the IRS Tax Return Transcript and not the IRS Tax Account Transcript. If unable to use the online request processes, call or complete IRS Form 4506-T. In most cases, for electronic filers, a 2015 IRS Tax Return Transcript may be requested from the IRS within 2 3 weeks after the 2015 IRS income tax return has been accepted by the IRS. Generally, for 2015 paper IRS income tax return filers, the 2015 IRS Tax Return Transcript may be requested within 6 8 weeks after the 2015 paper tax return has been received by the IRS. 3C. Verification of 2015 Income Information for Nontax Filers If the student or parent(s) were employed in 2015, they must list below the names of all employers, the amount earned from each employer in 2015, and whether an IRS W-2 form is provided. Provide copies of all 2015 W-2s issued to the student and parent(s) by their employers. List every employer even if the employer did not issue a W-2. If more space is needed, provide a separate page with the student s name and ID number at the top. If a W-2 is unavailable, attach a statement signed by the student and a parent explaining why the W-2 is unavailable and cannot be provided in a timely manner. The student and each parent who did not file a tax return also must submit a Verification of Nonfiling Letter from the IRS dated on or after October 1, This letter may be requested using the Get Transcript Online service on the IRS website at or by completing IRS Form 4506-T Verification: Lesson 1 79

82 Name of Student/Parent Employer s Name 2015 Amount Earned IRS W-2/ Verification of Nonfiling Letter Provided? 4. Student s High School Completion Status Provide one of the following documents indicating the student s high school completion status when the student will begin college in Check the box of the document you will attach to this worksheet. Office of Admissions has this documentation on file (no attachment necessary) High school diploma Final official high school transcript including graduation date when diploma was awarded (not some future date) Copy of the secondary school leaving certificate (or other similar document) for a student who completed secondary education in a foreign country and is unable to obtain a copy of his or her high school diploma or transcript General Educational Development (GED) certificate or GED transcript State certificate or test transcript received after the student has passed a state-authorized examination the state recognizes as the equivalent of a high school diploma [e.g., High School Equivalency Test (HiSET), etc.] Academic transcript of a successfully completed two-year program acceptable for full credit toward a bachelor s degree If state law requires a home schooled student to obtain a secondary school completion credential (other than a high school diploma or its recognized equivalent), a copy of that credential If state law does not require a home schooled student to obtain a secondary school completion credential, a transcript or the equivalent signed by your parent or guardian, that lists the secondary school courses completed and documents the successful completion of a secondary school education in a home school setting DD Form 214, Certificate of Discharge from Active Duty, if it indicates student has a high school diploma or its equivalent If you are unable to obtain any of the documentation listed above, you must contact our office. 5. Certification By signing this worksheet, each person certifies that all the information reported on this form is complete and correct. Student s Signature: Date: Student s Printed Name: Parent s Signature: Date: WARNING: If you purposely give false or misleading information on this worksheet, you may be fined, sentenced to jail, or both Verification: Lesson 1

83 Identity and Statement of Educational Purpose (To Be Signed at the Institution) The student must appear in person at to (Name of Postsecondary Educational Institution) verify his or her identity by presenting an unexpired valid government-issued photo identification (ID), such as, but not limited to, a driver s license, other state-issued ID, or passport. The institution will maintain a copy of the student s photo ID that is annotated by the institution with the date it was received and reviewed, and the name of the official at the institution authorized to receive and review the student s ID. In addition, the student must sign, in the presence of the institutional official, the Statement of Educational Purpose provided below. Identity and Statement of Educational Purpose (To Be Signed in the Presence of a Notary) If the student is unable to appear in person at (Name of Postsecondary Educational Institution) to verify his or her identity, the student must provide to the institution: (c) A copy of the unexpired valid government-issued photo identification (ID) that is acknowledged in the notary statement below, or that is presented to a notary, such as, but not limited to, a driver s license, other state-issued ID, or passport; and (d) The original Statement of Educational Purpose provided below, which must be notarized. If the notary statement appears on a separate page than the Statement of Educational Purpose, there must be a clear indication that the Statement of Educational Purpose was the document notarized. Statement of Educational Purpose I certify that I am the individual signing (Print Student s Name) this Statement of Educational Purpose and that the Federal student financial assistance I may receive will only be used for educational purposes and to pay the cost of attending for (Name of Postsecondary Educational Institution) (Student s Signature) (Date) (Student s ID Number) Note: Please contact the financial aid office if you are unable to appear in person Verification: Lesson 1 81

84 INDEPENDENT STUDENT VERIFICATION WORKSHEET (NASFAA sample) Your Free Application for Federal Student Aid (FAFSA) was selected for review in a process called verification. The law says that before awarding federal student aid, we may ask you to confirm the information you reported on your FAFSA. To verify that you provided correct information using this worksheet and any other required documents. If there are differences, your FAFSA information may need to be corrected. You and your spouse whose information was reported on the FAFSA must complete this worksheet, attach any required documents, and submit them to us. We may ask for additional information. If you have questions about verification, contact us as soon as possible so that your financial aid will not be delayed. Please complete the sections of this form according to the Verification Group marked with a below: V1 Standard Complete sections 1, 2, 3A, 3B and/or 3C, and 5 V4 Custom V5 Aggregate Complete sections 1, 4, 5, and Identity and Statement of Educational Purpose Complete sections 1, 2, 3A, 3B and/or 3C, 4, 5, and Identity and Statement of Educational Purpose 1. Student Information Name: Address: City, State Zip: Student ID Number: Date of Birth: Phone Number: Alternate Phone Number: 2. Household Information List the people in your household. Include: Yourself. Your spouse, if you are married. Your dependent children if they will receive more than half of their support from you from July 1, 2017 through June 30, Do not include children for whom child support is paid or foster children supported by another entity. Other people if they now live with you and you provide more than half of their support and will continue to provide more than half of their support from July 1, 2017 through June 30, If you need more space, please attach a separate page with the student s name and ID at the top. Full Name Age Relationship College During Verification: Lesson 1

85 3A. Tax Forms and Income Information All tax filers must submit a copy of their 2015 IRS Tax Return Transcript unless they have transferred their 2015 income tax return information into the FAFSA using the IRS Data Retrieval Tool (IRS DRT) and have not subsequently changed that information. Please DO NOT submit copies of your 2015 federal 1040, 1040A, or 1040EZ tax return, any IRS schedules (A, B, C, etc.), or state tax returns. If either the student or spouse did not and will not file a 2015 federal tax return, that individual(s) should go to Section 3C. 3B. Verification of 2015 IRS Income Tax Return Information for Tax Filers The student or spouse has used the IRS DRT in FAFSA on the Web to transfer 2015 IRS income tax return information into the student s FAFSA. The student or spouse is unable or chooses not to use the IRS DRT in FAFSA on the Web, and instead will provide the school a 2015 IRS Tax Return Transcript(s). The student or spouse has not yet used the IRS DRT in FAFSA on the Web, but will use the tool to transfer 2015 IRS income tax return information into the student s FAFSA once the 2015 IRS income tax return has been filed. Directions for using the IRS Data Retrieval Tool (IRS DRT) or requesting a Tax Return Transcript *The IRS DRT is available in the Financial Information section of the student s FAFSA. Go to and, under Returning User, select Login. After you have logged in, select Make FAFSA Corrections. Click the Financial Information tab. You will have the option to use the IRS DRT as long as you (student) or your spouse has Already Completed an IRS income tax return (select Already Completed from the drop-down box). You cannot use IRS DRT if you filed your tax return electronically within the past 3 weeks or by paper within the past 11 weeks. Once you use the IRS DRT for the student and/or spouse, select the Sign & Submit tab. The FAFSA must be signed electronically with the student s Federal Student Aid ID (FSA ID) and re-submitted for processing. If you have any trouble with this process, feel free to call the Financial Aid Office for help. ** To obtain a 2015 IRS Tax Return Transcript, go to and click on the Get Transcript Online or Get Transcript by Mail link. Make sure to request the IRS Tax Return Transcript and not the IRS Tax Account Transcript. If unable to use the online request processes, call or complete IRS Form 4506-T. In most cases, for electronic filers, a 2015 IRS Tax Return Transcript may be requested from the IRS within 2 3 weeks after the 2015 IRS income tax return has been accepted by the IRS. Generally, for 2015 paper IRS income tax return filers, the 2015 IRS Tax Return Transcript may be requested within 6 8 weeks after the 2015 paper tax return has been received by the IRS. 3C. Verification of 2015 Income Information for Nontax Filers If the student or spouse was employed in 2015, he or she must list below the names of all employers, the amount earned from each employer in 2015, and whether an IRS W-2 form was provided. Provide copies of all 2015 W-2s issued to the student and spouse by their employers. List every employer even if the employer did not issue a W-2. If more space is needed, provide a separate page with the student s name and ID number at the top. If a W-2 is unavailable, attach a statement signed by the student explaining why the W-2 is unavailable and cannot be provided in a timely manner. The student and/or spouse who did not file a tax return also must submit a Verification of Nonfiling Letter from the IRS dated on or after October 1, This letter may be requested using the Get Transcript Online service on the IRS website at or by completing IRS Form 4506-T. Name of Student/Spouse Employer s Name 2015 Amount Earned IRS W-2/ Verification of Nonfiling Letter Provided? Verification: Lesson 1 83

86 4. Student s High School Completion Status Provide one of the following documents indicating the student s high school completion status when the student will begin college in Check the box of the document you will attach to this worksheet. Office of Admissions has this documentation on file (no attachment necessary) High school diploma Final official high school transcript including graduation date when diploma was awarded (not some future date) Copy of the secondary school leaving certificate (or other similar document) for a student who completed secondary education in a foreign country and is unable to obtain a copy of his or her high school diploma or transcript General Educational Development (GED) certificate or GED transcript State certificate or test transcript received after the student has passed a state-authorized examination the state recognizes as the equivalent of a high school diploma [e.g., High School Equivalency Test (HiSET), etc.] Academic transcript of a successfully completed two-year program acceptable for full credit toward a bachelor s degree If state law requires a home schooled student to obtain a secondary school completion credential (other than a high school diploma or its recognized equivalent), a copy of that credential If state law does not require a home schooled student to obtain a secondary school completion credential, a transcript or the equivalent signed by your parent or guardian, that lists the secondary school courses completed and documents the successful completion of a secondary school education in a home school setting DD Form 214, Certificate of Discharge from Active Duty, if it indicates student has a high school diploma or its equivalent If you are unable to obtain any of the documentation listed above, you must contact our office. 5. Certification By signing this worksheet, each person certifies that all the information reported on this form is complete and correct. Student s Signature: Date: Student s Printed Name: Spouse s Signature (Optional): Date: WARNING: If you purposely give false or misleading information on this worksheet, you may be fined, sentenced to jail, or both Verification: Lesson 1

87 Identity and Statement of Educational Purpose Identity and Statement of Educational Purpose (To Be Signed at the Institution) The student must appear in person at to (Name of Postsecondary Educational Institution) verify his or her identity by presenting an unexpired valid government-issued photo identification (ID), such as, but not limited to, a driver s license, other state-issued ID, or passport. The institution will maintain a copy of the student s photo ID that is annotated by the institution with the date it was received and reviewed, and the name of the official at the institution authorized to receive and review the student s ID. In addition, the student must sign, in the presence of the institutional official, the Statement of Educational Purpose provided below. Identity and Statement of Educational Purpose (To Be Signed in the Presence of a Notary) If the student is unable to appear in person at (Name of Postsecondary Educational Institution) to verify his or her identity, the student must provide to the institution: (e) A copy of the unexpired valid government-issued photo identification (ID) that is acknowledged in the notary statement below, or that is presented to a notary, such as, but not limited to, a driver s license, other state-issued ID, or passport; and (f) The original Statement of Educational Purpose provided below, which must be notarized. If the notary statement appears on a separate page than the Statement of Educational Purpose, there must be a clear indication that the Statement of Educational Purpose was the document notarized. Statement of Educational Purpose I certify that I am the individual signing (Print Student s Name) this Statement of Educational Purpose and that the Federal student financial assistance I may receive will only be used for educational purposes and to pay the cost of attending for (Name of Postsecondary Educational Institution) (Student s Signature) (Date) (Student s ID Number) Note: Please contact the financial aid office if you are unable to appear in person Verification: Lesson 1 85

88 2015 Verification Data and Federal Tax Forms Comparison This chart indicates the location of need analysis data elements on the various 2015 federal tax forms and schedules. These data elements may be subject to verification or resolution of conflicting information requirements. For referenced FAFSA data, (S) refers to a student data element and (P) refers to a parent data element. Need Analysis Data Element Tax Return Transcripts* (1040, 1040A, and 1040EZ) A 1040EZ FAFSA Question Exemptions Claimed Adjusted Gross Income (AGI) Income Earned from Work U.S. Income Tax Paid Tax-Exempt Interest Income Untaxed Portions of IRA Distributions Exemption Number Line 6d Line 6d Line 5 38(S) 87(P) Adjusted Gross Income Per Computer 1040 Transcript Wages, Salaries, Tips, Etc. + Business Income or Loss Sch. C Per Computer + Farm Income or Loss (Schedule F) Per Computer 1040A Transcript Wages, Salaries, Tips, Etc. + Business Income or Loss Sch. C Per Computer + Farm Income or Loss (Schedule F) Per Computer 1040EZ Transcript Wages, Salaries, Tips, Etc Transcript Income Tax After Credits Per Computer minus Excess Advance Premium Tax Credit Repayment Amount 1040A Transcript Tentative Tax Per Computer minus Total Credits Per Computer 1040EZ Transcript Total Tax Liability TP Figures Per Computer minus Health Care: Individual Responsibility Line 37 Line 21 Line 4 36(S) 85(P) Lines Schedule K-1 (Form 1065), Box 14, Code A Form W-2, Box 1 Line 56 minus 46 Line 7 Form W-2, Box 1 Line 28 minus 36 Line 1 Form W-2, Box 1 Line (S) 88-89(P) 37(S) 86(P) Tax-Exempt Interest Line 8b Line 8b N/A 45d(S) 94d(P) Total IRA Distributions minus Taxable IRA Distributions Lines 15a minus 15b (excludes rollovers) Lines 11a minus 11b (excludes rollovers) N/A 45e(S) 94e(P) Verification: Lesson NASFAA

89 Need Analysis Data Element Tax Return Transcripts* (1040, 1040A, and 1040EZ) A 1040EZ FAFSA Question Untaxed Portions of Pension and Annuity Distributions IRA Deductions and Payments to SEP, SIMPLE, Keogh, and Other Qualified Plans Tax-Deferred Payments to Pensions and Savings Plans Education Tax Credits (American Opportunity and Lifetime Learning Credits) Total Pensions and Annuities minus Taxable Pension/Annuity Amount KEOGH/SEP Contribution Deduction + IRA Deduction Per Computer N/A Education Credit Per Computer Lines 16a minus 16b (excludes rollovers) Lines 12a minus 12b (excludes rollovers) N/A 45f(S) 94f(P) Lines Line 17 N/A 45b(S) 94b(P) Form W-2, Boxes 12a through12d, Codes D, E, F, G, H, S Form W-2, Boxes 12a through 12d, Codes D, E, F, G, H, S N/A 45a(S) 94a(P) Line 50 Line 33 N/A 44a(S) 93a(P) Important Note: Student aid, Earned Income Credit (EIC), Additional Child Tax Credit, all combat pay, welfare payments, extended foster care benefits, untaxed portions of Social Security benefits, Supplemental Security Income, Workforce Innovation and Opportunity Act (WIOA) educational benefits, on-base military housing, military basic housing allowances, benefits from flexible spending arrangements (e.g., cafeteria plans), foreign income exclusions, and credits for federal tax on special fuels are excluded when calculating an applicant s expected family contribution (EFC) and eligibility for Title IV aid. * IRS Tax Return Transcripts do not include any information from an amended tax return. An applicant or an applicant s parent(s) who filed or will file his or her income tax return as Married Filing Separately, or who is married to someone other than the individual included on a joint income tax return, must provide separate IRS Tax Return Transcripts for each person whose information is included on the FAFSA. For verification purposes, schools are instructed to ignore RECOMPUTED or VERIFIED amounts which appear on the tax transcript. For all tax transcripts, if taxes paid is negative, enter zero NASFAA Verification: Lesson 1 87

90 Highlights of IRS Form W-2 Employers annually must file an IRS Form W-2 for taxable wages paid to each employee from whom: Income, Social Security, or Medicare taxes were withheld; or Income taxes would have been withheld under certain conditions. Every employer engaged in a trade or business who pays an employee remuneration of $600 or more, including noncash payments, for services performed also must file a Form W-2 for the employee. When required, a financial aid administrator may collect the Form W-2 to verify certain forms of taxable or untaxed income not reflected elsewhere. Many of the boxes on the Form W-2 are self-explanatory; comments are provided for selected items. Box 1 Wages, tips, other compensation: Includes all wages, tips, and compensation subject to federal income tax prior to payroll deductions. The wages listed in Box 1 may be less than those listed in Box 3 Social Security wages or Box 5 Medicare wages and tips. An untaxed or pretaxed difference in these amounts occurs when an employee contributes to certain tax-deferred retirement, savings, flexible spending, or cafeteria plans. The actual amount of pretaxed income deferred may appear in Box 12 along with a code letter indicating the plan type. In some cases, this amount constitutes untaxed income that should be reported on the FAFSA. Box 2 Federal income tax withheld: This indicates taxes withheld on behalf of the employee, not taxes paid to the IRS. Therefore, this amount is not used to verify the income taxes paid amount reported on the FAFSA [questions 37 (student) or 86 (parent)]; see 2015 Verification Data and Federal Tax Forms Comparison. Box 3 Social Security wages: This indicates total wages paid to the employee (before payroll deductions) subject to employee Social Security tax but not including Social Security tips and allocated tips. Box 5 Medicare wages and tips: If the amount in Box 5 is greater than the amount in Box 1, this is an indication of untaxed or pretaxed income that may be included in Box 12. Due to state variations in the treatment of such income, the financial aid administrator may want to follow up if a discrepancy is noted. Box 8 Allocated tips: These are tips allocated to the employee by large food or beverage establishment employers. This is a form of earnings not reported in Boxes 1, 3, 5, or 7 that should be included in earnings reported on line 7 of Form 1040 or 1040A, or line 1 of Form 1040EZ. Box 11 Nonqualified plans: This reflects the total amount of distributions made to an employee from a nonqualified plan or a nongovernmental section 457(b) plan. Any amount in this box is included as taxable income on the tax return and is not reported as untaxed income on the FAFSA. Box 12 (a through d) Amounts reported with codes D through H, and S should be reported as untaxed income on the FAFSA [questions 45a (student) and 94a (parent)]. Amounts identified by other codes are not reported on the FAFSA, although a financial aid administrator may include these amounts as untaxed income on a case-by-case basis under professional judgment or for purposes of awarding institutional financial aid funds Verification: Lesson NASFAA

91 Code A B C D E F G H Description Uncollected Social Security or Railroad Retirement Tax Act (RRTA) tax on tips Uncollected Medicare tax on tips Taxable cost of group-term life insurance over $50,000 [included as income in Boxes 1, 3 (up to the $118,500 Social Security wage base for 2015), and 5] Elective deferrals under a section 401(k) cash or deferred arrangement plan Elective deferrals under a section 403(b) salary reduction agreement Elective deferrals under a 408(k)(6) salary reduction SEP Elective deferrals and employer contributions (including nonelective deferrals) to any governmental or nongovernmental section 457(b) deferred compensation plan Elective deferrals to a section 501(c)(18)(D) tax-exempt organization plan J Nontaxable sick pay (not included in Boxes 1, 3, or 5) K L M N 20 percent excise tax on excess golden parachute payments Substantiated employee business expense reimbursements (nontaxable) Uncollected Social Security or RRTA tax on taxable cost of group-term life insurance over $50,000 (former employees only) Uncollected Medicare tax on taxable cost of group-term life insurance over $50,000 (former employees only) P Excludable reimbursed moving expenses paid directly to employee (not included in Boxes 1, 3, or 5) Q Nontaxable combat pay R Employer contributions to an Archer Medical Savings Account (MSA) S Employee salary reduction contributions to a section 408(p) SIMPLE retirement plan (not included in Box 1) T Adoption benefits (not included in Box 1) V Income from the exercise of nonstatutory stock options [included in Boxes 1, 3 (up to the Social Security wage base), and 5] W Employer contributions [including amounts employee elected to contribute using a section 125 cafeteria plan] to a Health Savings Account (HSA) Y Deferrals under a section 409A nonqualified deferred compensation plan Z Income under a nonqualified deferred compensation plan that fails to satisfy section 409A (included in Box 1) AA Designated Roth contributions to a section 401(k) plan BB Designated Roth contributions under a section 403(b) plan DD Cost of employer-sponsored health coverage EE Designated Roth Contributions under a governmental section 457(b) plan 2017 NASFAA Verification: Lesson 1 89

92 Box 14 Other: The full annual lease value of a vehicle provided to an employee and included in Box 1 must be reported here, or on a separate statement to the employee. In addition, employers may use this box to record other income information it wants to provide the employee, such as: State disability insurance taxes withheld; Union dues; Uniform payments; Health insurance premiums deducted; Nontaxable income; Educational assistance payments; Parsonage and utilities allowances for members of the clergy; and The following types of contributions to pension plans: Nonelective employer pension plan contributions made on behalf of an employee, Voluntary after-tax contributions (excluding designated Roth contributions) deducted from an employee s pay, Required employee contributions, and Employer matching contributions. Several of the items the IRS suggests could be reported in Box 14 are already captured on the FAFSA (e.g., in adjusted gross income). Box 14 could include certain nonelective pension plan contributions that are not counted in need analysis. Employers are not required to provide information in Box 14, and it is unlikely they will be consistent in what is reported. However, if Box 14 reflects something obvious that should have been but was not included on the FAFSA, the financial aid administrator must resolve the conflicting information. For example, the parsonage allowance, which must be reported as untaxed income on the FAFSA, often is reported in Box 14 instead of Box Verification: Lesson NASFAA

93 Reporting and Verification Status Codes Federal Pell Grant-eligible applications must be reported to the Common Origination and Disbursement (COD) System using certain verification status codes on the student s origination record, and indicate the basis on which payment is made. The table below outlines these status codes and when they must be used. Verification Status Code V W S Blank Meaning Verified Without documentation Selected/Not verified Not verified Comments Verification was completed on records selected for verification by either the Central Processing System (CPS) or the school. The applicant has been selected for verification and the school has chosen to pay the initial Federal Pell Grant disbursement without verification documentation (i.e., an interim disbursement). This code must be updated once verification is completed. The applicant was selected for verification by the CPS, but was not verified because the applicant is exempt from verification under one of the verification exclusions in 34 CFR (b). The application was not selected by the CPS or the school; therefore, it was not verified. The application was selected by the CPS after the student ceased attending the school and after all disbursements and late disbursements were made to the student (or parent PLUS borrower). Any applicant who has been selected for verification by the CPS must have either verification status code V or S. The verification status code cannot be blank if the applicant was selected by the CPS. Any applicant who has been selected for verification by the school, must have verification status code V. Otherwise, it must be blank if the school has chosen not to verify the applicant. The school cannot use verification status code S for applicants selected by the school. If the school made an interim Federal Pell Grant disbursement using verification status code W, verification must be completed and the verification status code must be changed to either V or S, as appropriate. If verification was not completed and the applicant is not exempt from verification, the Federal Pell Grant must be adjusted to a zero dollar amount ($0.00) NASFAA Verification: Lesson 1 91

94 Lesson 1 Answer Keys Quick Quiz 1 1. Except for high school completion, identity, and Statement of Educational Purpose, which of the following Title IV aid programs are excluded from federal verification requirements? (check all that apply) Federal Pell Grants Iraq and Afghanistan Service Grants Teacher Education Assistance for College and Higher Education Grants Federal Supplemental Educational Opportunity Grants Federal Work-Study 2. For each of the following federally required verification data elements, indicate to which verification tracking group it belongs. Some data elements may apply to multiple groups. V1 Standard Verification Tracking Group V4 Custom Verification Tracking Group V5 Aggregate Verification Tracking Group Verification Data Element U.S. income taxes paid Untaxed portions of Individual Retirement Account distributions Income earned from work Adjusted gross income IRA deductions and payments Statement of Educational Purpose Household size Verification Tracking Group(s) to Which It Belongs (V1, V4, and/or V5) V1, V5 V1, V5 V1, V5 V1, V5 V1, V5 V4, V5 V1, V5 3. What is the key difference between verification and conflicting information? Verification is the process used by the institution to check the accuracy of the information the student and the dependent student s parents provided on the FAFSA. Resolution of conflicting information involves confirming the accuracy of all information related to the student s application throughout the institution that is suspected to be incorrect Verification: Lesson NASFAA

95 Quick Quiz 1 (cont d) 4. Residents of the Northern Mariana Islands and the Federated States of Micronesia are exempt from verification. True False 5. For each of the following federally required verification data elements, indicate to which verification tracking group it belongs. Some data elements may apply to multiple groups. V1 Standard Verification Tracking Group V4 Custom Verification Tracking Group V5 Aggregate Verification Tracking Group Verification Data Element High school completion status Number in college Untaxed portions of pensions Education tax credits Tax-exempt interest income Identity Verification Tracking Group(s) to Which It Belongs (V1, V4, and/or V5) V4, V5 V1, V5 V1, V5 V1, V5 V1, V5 V4, V5 6. The student s entire application is excluded from verification of income information if the student is eligible only for unsubsidized student assistance, such as Direct Unsubsidized Loan, PLUS, Iraq and Afghanistan Service Grant (IASG), or TEACH Grant funds. 7. The parental data of a dependent student applicant are excluded from verification under which of the following circumstances? (check all that apply) At least one of the parents is mentally incapacitated Both parents contact information is unknown and cannot be obtained by the applicant Both parents reside in a foreign country and cannot be contacted by normal means of communication Both parents are mentally incapacitated Both parents are deceased and the student is adopted 2017 NASFAA Verification: Lesson 1 93

96 Quick Quiz 1 (cont d) 8. If both parents die after the student has applied as a dependent student, the student is required to update his dependency status. True False 9. Which of the following data elements are excluded from verification under certain circumstances? (check all that apply) High school completion status, if the student self-certified it on the FAFSA Number in the independent student s household, if the student is married and the household size is two Number in the dependent student s parent s household, if the parent is unmarried and the household size is two 10. Except for high school completion, identity, and Statement of Educational Purpose, which of the following Title IV aid programs are excluded from federal verification requirements? (check all that apply) Federal Perkins Loans Direct Subsidized Loans Direct Unsubsidized Loans Direct PLUS for parents Direct PLUS for graduate and professional students 11. The independent student applicant s spousal data are excluded from verification under which of the following circumstances? (check all that apply) The spouse is deceased The spouse is mentally incapacitated The spouse cannot be located because his or her contact information is unknown and cannot be obtained by the applicant The spouse has applied for Title IV aid at another school and is only eligible for unsubsidized student assistance The spouse resides in a foreign country and can be contacted by normal means of communication 12. Which of the following are exempt from verification requirements? (check all that apply) Foreign institutions not located in a state Study abroad students whose home institutions are located in a state Federally required verification data elements at institutions participating in the campus-based programs Graduate and professional students Verification: Lesson NASFAA

97 Quick Quiz 2 1. Which of the following items are transferred from the IRS to the FAFSA using the IRS Data Retrieval Tool? (check all that apply) IRA deductions and payments U.S. income tax paid Tax filing status Payments to tax-deferred pensions and retirement savings plans Untaxed portions of pensions 2. A person who is required to report FAFSA information and will file a tax return, but who had not yet filed a tax return at the time the FAFSA was filed, should have included estimated AGI and other tax data on the FAFSA. If federally selected for verification, the tax return does not need to be filed and a signed statement with W-2s may be used to complete verification. the tax return must be filed and the resulting tax data documentation must be used to complete verification. 3. Which of the following IRS Request Flags indicates the IRS Data Retrieval Tool was used and that data has not been altered by the applicant since the data were retrieved? Which of the following items are transferred from the IRS to the FAFSA using the IRS Data Retrieval Tool? (check all that apply) Health Care Tax Credit Adjusted gross income Number of claimed exemptions Untaxed portions of IRA distributions Additional Child Tax Credit 5. An alternative tax transcript known as the Return Transcript for Taxpayer (RTFTP) is required to complete verification for individuals identified by the IRS as victims of identity theft. True False 2017 NASFAA Verification: Lesson 1 95

98 Quick Quiz 2 (cont d) 6. Which of the following IRS documents cannot be used alone to complete federal verification? (check all that apply) Record of Account Transcript Tax Account Transcript Return Transcript for Taxpayer (RTFTP) Information Returns Processing Transcript Request-Wages (IRPTR-W) Tax Return DataBase View (TRDBV) transcript 7. List all four of the signature formats which schools can accept on all verification documentation: Wet/original signatures Photocopied signatures Faxed signatures Electronic signatures 8. Which of the following items are transferred from the IRS to the FAFSA using the IRS Data Retrieval Tool? (check all that apply) American Opportunity Tax Credit Earned Income Tax Credit Tax return type Housing allowances for members of the military Tax-exempt interest 9. An institution may accept as verification documentation any IRS tax transcript that includes all of the income and tax information required to be verified. True False Verification: Lesson NASFAA

99 Quick Quiz 2 (cont d) 10. Which of the following can be verified using the IRS Tax Return Transcript? (check all that apply) Untaxed IRA distributions Payments to tax-deferred pension plans Untaxed pension and annuity distributions Veteran s noneducation benefits 11. If an individual is otherwise required to provide an IRS Form W-2 for verification and is unable to do so, explain what he or she should provide instead. The taxpayer may provide a signed statement certifying for the tax year the amount of income earned from work, the source of the income, and the reason why a W-2 is unavailable in a timely manner. An IRS Wage and Income Transcript also is acceptable in place of a W The institution should not accept an IRS Verification of Nonfiling Letter dated before April 15, 2016 May 1, 2016 October 1, 2016 July 1, Which of the following are required to verify income for nontax filers? (check all that apply) Tax Return Transcript indicating income earned from work IRS Verification of Nonfiling Letter Signed statement indicating the source and amount of each source of income earned from work Signed W-2 forms for each source of income earned from work Signed statement indicating a tax return was not and is not required to be filed 14. If an institution has already collected the required verification documentation, and then determines the taxable and untaxed income amounts provided do not appear sufficient to support the household, the institution may request additional financial information to explain how the family was financially supported during the base year. True False 2017 NASFAA Verification: Lesson 1 97

100 Quick Quiz 3 1. Foster children for whom the state provides more than half support are not included in the household size for Title IV purposes. True False 2. Verification of household size on federally selected applications is required in which of the following circumstances? (check all that apply) The household size indicated on the dependent student s ISIR is two and the parents are married The household size indicated on the independent student s ISIR is two and the student is married The household size indicated on the dependent student s ISIR is three and the parents are unmarried and living together The household size indicated on the independent student s ISIR is one and the student is divorced 3. When an individual is required for the award year to verify his or her tax data, but that individual has filed for an extension to file his or her taxes with the IRS, which of the following alternative documentation is required to complete verification? (check all that apply) A copy of IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Tax Return the individual filed with the IRS for the tax year If applicable, a copy of an expired or unexpired IRS approval of an extension beyond the automatic six-month extension if the individual requested an additional tax filing extension for the tax year A copy of a W-2 for each source of employment income received for the tax year If self-employed, a signed statement certifying the amount of the individual s AGI and U.S. income tax paid for the tax year An IRS Verification of Nonfiling Letter dated on or after January 1, If the student is unable to appear in person at the school to verify his or her identity and Statement of Educational Purpose, the student must appear before a _notary public_ to _present and sign_ his or her identification and Statement of Educational Purpose Verification: Lesson NASFAA

101 Quick Quiz 3 (cont d) 5. What 14 forms of documentation are acceptable to verify high school completion status? A copy of a high school diploma; A copy of a final, official high school transcript showing the date when the diploma was awarded; A copy of the secondary school leaving certificate (or other similar document) for a student who completed a secondary education in a foreign country and is unable to obtain a copy of his high school diploma or transcript; A copy of a GED certificate or GED transcript; A state certificate received by a student after passing a state-authorized examination the state recognizes as the equivalent of a high school diploma; A test transcript received by a student after passing a state-authorized examination the state recognizes as the equivalent of a high school diploma under certain conditions; An academic transcript indicating the student successfully completed at least a two-year program, or two years worth of postsecondary coursework, acceptable for full credit toward a baccalaureate degree; A copy of a secondary school completion credential for home school, if state law requires home schooled students to obtain that credential; A transcript or the equivalent, signed by the parent or guardian of a home-schooled student, listing the secondary school courses the student completed and documenting the successful completion of a secondary school education in a home school setting; DD Form 214, Certificate of Release or Discharge from Active Duty, if it indicates student has a high school diploma or its equivalent; For a student who has not completed high school and is seeking enrollment in a program leading to at least an associate degree or its equivalent, documentation from the high school that he or she excelled academically and documentation that he or she meets the written policy for admitting such students at the postsecondary institution; Documentation of the student's qualification for enrollment as a regular student under the ATB provisions; For a student enrolled in an "eligible career pathway program," documentation that she passed an approved ATB test or completed at least 6 credit hours or 225 clock hours that are applicable toward a degree or certificate offered by the school; or Self-certification, if an asylee, a refugee, or a victim of human trafficking is unable to obtain documentation verifying the completion of a secondary school education in a foreign country NASFAA Verification: Lesson 1 99

102 Quick Quiz 3 (cont d) 6. Draw an arrow to match the Verification Status Code in the left-hand column to the applicable description in the right-hand column: Verification Status Code Description V Applicant not selected by the CPS or the institution, so verification was not performed W Applicant selected by CPS, but not verified because the application met one of the verification exclusions S Verification was completed on records selected for verification by either the CPS or the school blank Applicant selected and institution has chosen to pay initial Federal Pell Grant disbursement without documentation 7. Payments to tax-deferred pension and savings plans can be verified using which of the following codes listed in W-2 Boxes 12a through 12d? (check all that apply) D DD H Y Verification: Lesson NASFAA

103 Learning Activity: Required Verification Documentation Karl Grimes: Karl is a dependent student at Walker College. He is federally selected for verification in the Custom Verification Tracking Group on his FAFSA. Karl was employed in 2015 and filed an income tax return. He used the IRS Data Retrieval Tool and the ISIR indicated an IRS Request Flag of 04. Karl indicated that he completed high school on the FAFSA. His father, Rick, is the only parent included on the FAFSA. Rick also filed an income tax return for 2015, used the IRS DRT, and the ISIR indicated a IRS Request Flag of 02. Rick also indicated on the FAFSA that child support was paid during the 2015 calendar year for Karl s sister Judith to her mother, Lori. 1. What is the Verification Tracking Flag for this Tracking Group? V4 2. Detail what documentation (if any) is federally required from Karl to verify his information, including all information which must be contained in that documentation. Karl must: 1) provide a copy of his high school diploma or final official high school transcript that includes the date his diploma was awarded (or other alternative high school completion documentation), if Walker College doesn t already have this on file; 2) present a valid unexpired government-issued photo ID to verify his identity; and 3) sign a Statement of Education Purpose. The ID and Statement of Educational Purpose must be presented in person to either Walker College s authorized official or a notary public. 3. Detail what documentation (if any) is federally required from Rick to verify his information, including all information that must be contained in that documentation. Rick does not need to provide any documentation to complete verification for Karl. For , child support paid is no longer a federally required verification item and no longer included in verification tracking group V4. 4. Which documents collected in #2 or #3 above require Karl s signature? Karl needs to sign only the Statement of Educational Purpose. The other documents do not require signatures. 5. Which documents collected in #2 or #3 above require Rick s signature? Rick does not need to provide signatures on any of the documents NASFAA Verification: Lesson 1 101

104 Learning Activity: Required Verification Documentation (cont d) Lizzie: Lizzie is a first-year dependent student at Flowers Institute. She is federally selected for verification in the Standard Verification Tracking Group on her FAFSA. Her mother and father, Carol and Tyreese, reported their income and asset information on the FAFSA. Lizzie and her parents filed taxes and used the IRS Data Retrieval Tool (DRT) when they completed her FAFSA. The IRS Request Flag on Lizzie s ISIR is 02. Lizzie indicated five in the household size and two in college on her FAFSA. This includes her sister Mika and her brother Daryl. Mika will be enrolled at least half time in a baccalaureate degree program at Grove College during the academic year. 1. What is the Verification Tracking Flag for this Tracking Group? V1 2. Detail what documentation the school is required collect to complete verification, including all information that must be contained in that documentation. You will need a written statement or verification worksheet indicating all of the following: 1) the name and age of Lizzie, Carol, Tyreese, Mika, and Daryl, and their relationships to Lizzie; and 2) the name of the postsecondary institution in which Mika will be enrolled at least half time during Because Lizzie and her parents used the IRS Data Retrieval Tool, and that data has not been altered (as indicated by the IRS Request Flag of 02 ), you do not need to collect tax data documentation for Lizzie or her parents. 3. Indicate whether or not the following individual s signature is required on all of the documentation collected for #2 above. Yes No Yes No Yes No Lizzie s signature Carol s and Tyreese s signatures Carol s or Tyreese s signatures 4. After you have collected the above documentation, you have reason to believe the number in college information may be inaccurate. What additional documentation must you collect from Lizzie? You must collect documentation from Grove College indicating that Mika is or will be enrolled at that institution at least half time in a program leading to a degree, certificate, or other recognized educational credential during the award year. This may include a letter of admission to Grove College, or actual documentation of Mika s registration or enrollment at Grove College Verification: Lesson NASFAA

105 Learning Activity: Required Verification Documentation (cont d) Maggie: Maggie is a married independent student who filed her FAFSA. She and her husband, Glenn, have no children so there are only two listed in the household. Only Maggie will be enrolled in college. This is her second year at Woodbury University. Maggie worked one part-time job and was not required to file a tax return in 2015, so she did not file one. Glenn filed an IRS 1040 for 2015, and he used the IRS Data Retrieval Tool when completing Maggie s FAFSA. Her ISIR has an IRS Request Flag of 04. She has been selected for the Standard Verification Tracking Group. Woodbury s financial aid office uses a verification worksheet to conduct verification for the Standard Verification Tracking Group. 1. What is the Verification Tracking Flag for this Tracking Group? V1 2. Detail what documentation the school is required collect to complete verification, including all information that must be contained in that documentation. From Maggie: A verification worksheet or written statement certifying that she has not filed and is not required to file a 2015 tax return and indicating the source and amount of her 2015 income, a Verification of Nonfiling Letter from the IRS dated on or after October 1, 2016, and a W-2 from her employer. Because she is independent and there are only two in the household and one in college, household size and number in college do not need to be verified. From Glenn: A Tax Return Transcript (or acceptable alternative tax transcript) to verify AGI, taxes paid, untaxed portions of IRA distributions, untaxed portions of pensions, IRA deductions and payments, taxexempt interest, and education tax credits. 3. Indicate whether or not the following individual s signature is required on the above documentation. Yes No Yes No Yes No Maggie s signature on the verification worksheet Glenn s signature on the verification worksheet Maggie s and Glenn s signature on the tax documentation 4. After you have collected the above documentation, you find out that Glenn filed an amended tax return for What additional documentation must you collect from Maggie and/or Glenn? Whose signature is required on each additional document? From Glenn only: A copy of the IRS Tax Return Transcript or acceptable alternative IRS tax transcript (which does not need to be signed) reflecting the information filed on the original tax return (if not provided already), and a signed copy of the IRS Form 1040X that was filed with the IRS. A signed copy of the original tax return that was filed with the IRS is not acceptable for completing verification. IRS DRT cannot be used to complete verification when an amended tax return has been filed NASFAA Verification: Lesson 1 103

106 NOTES: Verification: Lesson NASFAA

107 Lesson 2: Changing Applicant Data Learning Objectives After completing this lesson, you will understand: When corrections must be reprocessed via the Central Processing System; What an update is and when it can be made; and Professional judgment and authority to use it. Key Concepts The key concepts you will learn in this lesson: Corrections; Cross-year conflicting information; Updates; and Professional judgment adjustments. Resources for This Lesson NASFAA Verification Checklist for Verification Corrections chart Verification Updates chart Glossary Icons You will see the following icons in Lesson 2: Key concept Quick quiz Corrections Introduction In Lesson 1, you were introduced to verification. You learned when verification is required and the programs to which it applies, required data elements, and the different verification tracking groups. In this lesson, we will build upon that knowledge as we discuss corrections, updates, and professional judgment (PJ) adjustments. Definition Corrections are changes to data elements that were incorrect at the time the FAFSA was filed. In many situations when corrections are made to application data, the institution or the student must submit these corrections to the Central Processing System (CPS) for reprocessing before the student can be paid. The NASFAA Verification Checklist for on page 121 is a tool to assist in identifying when verification corrections are necessary and must be submitted to the CPS for reprocessing. Data Correct as Reported If data on the application agree with verification documentation and the institution has a valid Institutional Student Information Record (ISIR) or Student Aid Report (SAR), Federal Pell Grant, Iraq and Afghanistan Service Grant (IASG), Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Perkins Loan, and Teacher Education Assistance for College and Higher Education (TEACH) Grant funds may be disbursed based on the ISIR or SAR. Federal Work-Study (FWS) employment may also begin, and Direct Loans may be originated and disbursed. A valid ISIR or SAR is one on which all of the information used to calculate the applicant s expected family contribution (EFC) is accurate and complete. Incorrect Data If application data do not agree with the verification documentation provided, the institution must correct all verified data and determine whether the corrections must be submitted to the CPS for reprocessing. Correcting incorrect data can change the type of aid for which a student is eligible. For example, a student who was eligible for a Federal Pell Grant before verification may become ineligible for that program after the school completes verification but may gain eligibility for IASG funds NASFAA Verification: Lesson 2 105

108 Reflection questions Learning activity Helpful hint Required Reprocessing of Corrections There are some FAFSA data corrections institutions or applicants must report to the CPS for reprocessing. Changes in a Single Dollar Item of $25 or More. Corrections must be submitted by the institution or applicant to the CPS when there is a change in a single dollar item of $25 or more and subsidized federal student assistance is involved. These include positive or negative changes in a single dollar item of $25 or more. The subsidized aid programs include the Federal Pell Grant Program, campus-based programs (Federal Perkins Loan, FSEOG, and FWS), and Direct Subsidized Loan Program. There are additional steps the institution must take for students awarded funds from the Federal Pell Grant Program. The institution must recalculate the applicant s financial aid eligibility using the EFC on the corrected valid SAR or ISIR. Additional funds can be disbursed only if the institution receives a valid SAR or ISIR for the applicant and the applicant s eligibility increased as a result of recalculation. If the institution elected to make an interim disbursement and the recalculation reduced eligibility, the resulting overaward must be resolved. This also applies to any possible overpayments. Interim disbursements are discussed in Lesson 3. Additional guidance on the resolution of overawards and overpayments may be found in Volume 4, Chapter 3 of the FSA Handbook. The Verification Corrections chart on page 124 also is a handy resource. Corrections are changes to data elements that were incorrect at the time the FAFSA was filed. The campus-based programs and Direct Subsidized Loans require an applicant s financial aid be adjusted up or down using the EFC on the corrected valid SAR or ISIR. As with the Federal Pell Grant, the institution must resolve any overaward if recalculation reduces the applicant s eligibility used to make an interim disbursement. The institution must also comply with procedures to resolve a campus-based overaward that is not part of an interim disbursement. Campus-based programs are differentiated by an overaward tolerance. An overaward tolerance of $300 is allowed if the overaward occurs after campus-based aid was award. Any campus-based overaward over $300 must be resolved. Errors in Nondollar Items. Corrections must be submitted by the institution or applicant to the CPS when there is a change in any nondollar item and subsidized federal student assistance is involved. Examples of nondollar Verification: Lesson NASFAA

109 items may include household size or number in college. Another example is a student who is ineligible for Federal Pell Grant, IASG, and FSEOG funds if she reports graduate student status on the FAFSA. If the graduate status is incorrect, the student or school must correct the data and submit it to the CPS for reprocessing in order for the student to receive a Federal Pell Grant, IASG, or FSEOG. These nondollar item corrections must be submitted even if there are no errors that affect the calculation of the EFC. For the Federal Pell Grant Program, the institution must begin with recalculating the applicant s eligibility using the EFC on a corrected valid SAR or ISIR. Additional funds can only be disbursed if the institution receives a valid SAR or ISIR for the applicant and her eligibility increased as a result of recalculation. Like the case with changes in a single dollar item of $25 or more, the institution must resolve any overaward if recalculation reduces the applicant s eligibility and she received an interim disbursement. The institution must also resolve any overpayment if recalculation reduces the applicant s eligibility for disbursed funds. The process for the campus-based programs and Direct Subsidized Loans is the same as for changes in a single dollar item of $25 or more. The institution must adjust the applicant s financial aid using the EFC on the corrected valid SAR or ISIR. The institution is also responsible for resolving any overaward if recalculation reduces the student s financial aid eligibility used to make an interim disbursement. Compliance with procedures to resolve a campus-based overaward that is not a part of an interim disbursement is mandatory. However, there is an overaward tolerance of $300 for campus-based programs if the overaward occurs after campus-based aid was awarded. Any campusbased overaward over $300 must be resolved. Optional Reprocessing of Corrections An institution may elect to submit all corrections to application data to the CPS for reprocessing. However, doing so may create more work for the institution than is necessary, as well as needlessly delay disbursements to students. It is possible there were no errors in nondollar items or there was a change to a single dollar item of less than $25. Corrections to these items are optional, not required. Cross-Year Conflicting Information One particular area where corrections may need to be made is cross-year conflicting information between the and award years. This is due to the switch from the use of prior-year income to the use of prior-prior-year (PPY) income for the specified year when completing the FAFSA. As discussed in Lesson 1, the specified year for the award year was 2015, and the specified year for the award year is also Because the same year is used to report income and tax information for both award years, there may be conflicting information between the award years, meaning that data for either or both award years may need to be corrected. In an effort to minimize instances of possible conflicting information, ED encourages applicants to use the IRS Data Retrieval Tool (IRS DRT) for both award years. In addition, applicants are presented with real-time warnings when completing the FAFSA, if income or tax amounts being entered differ from amounts reported on the FAFSA. ED will compare the last ISIR transaction with the ISIR transaction and determine if there is conflicting information between the two and if that conflicting information, when resolved, would result in a significant change in the student s EFC. If so, the CPS will flag the ISIR with Comment Code 399, informing the institution that it must resolve the possible conflicting information. If Comment Code 399 is not present on the ISIR and the school has no other conflicting information, then no further action by the institution is required. See Dear Colleague Letter GEN for more information on the identification of cross-year conflicting information and assignment of Comment Code 399, as well as when resolution of Comment Code 399 is required. Additional guidance may also be found in ED s Early FAFSA Frequently Asked Questions webpage earlyfafsafaqv1.html on the Information for Financial Aid Professionals (IFAP) website NASFAA Verification: Lesson 2 107

110 Quick Quiz 1 Now it s time to check what you have learned so far. Answer the following questions and check your responses using the Answer Key on page What is a correction? 2. What makes a SAR or ISIR valid? 3. A school must submit corrections to the CPS for changes in a single dollar item of $25 or more. True False 4. How are overawards treated differently for the campus-based programs, compared to others such as the Federal Pell Grant Program? 5. What does Comment Code 399 indicate? Verification: Lesson NASFAA

111 Learning Activity: Corrections Review the following scenarios and answer the accompanying questions. Check your work using the Answer Key on page Damaris is a dependent, second-year student. Before the FAFSA was filed, Damaris and her family moved. Since her FAFSA was a renewal, the old address carried over. She used the IRS Data Retrieval Tool successfully. She was selected for verification and is eligible for subsidized aid. The institution completed verification, but noticed on all of Damaris documentation, her address was different. She explained that she moved before the FAFSA was filed, but that the old address carried over on the renewal. Is this correction: Optional Required Why? 2. Timothy is in his last year of college. He has never been selected for verification until now. In previous years, his EFC had been just outside of the range for the Federal Pell Grant. This year, his EFC plummeted and he is now Pell-eligible, despite the fact that 2015 tax and income information was used to complete both the and FAFSA. He initially reported four people in his household size, but on the verification form, he reported seven. His family had been supporting his aunt and her two children since December of the prior year after she lost her job and her apartment building was destroyed in a fire. Is this correction: Optional Required Why? 2017 NASFAA Verification: Lesson 2 109

112 Updates In this next section of the lesson, we will differentiate between corrections and updates. Definition Updates are changes to data elements that were correct at the time of application, but changed since the FAFSA was filed. As a general rule, information that was correct as of the date the FAFSA was filed cannot be updated. Updates are allowable only to the following items: Dependency status; Number in household and number in college; and Marital status. Dependency status, household size, and number in college must be updated in certain circumstances. If the institution makes a disbursement to a student based on information that is later updated, it must use the updated information to determine the correct award. To ensure the student receives the correct award, the institution must adjust the prior disbursement, future disbursements, or both if necessary. If information is required to be updated, the institution must submit updates to the CPS according to the same thresholds previously discussed for corrections nondollar items and changes to any single dollar item of $25 or more. Updating of other data elements, such as assets, is not allowed. However, the financial aid administrator may make a PJ decision after verification to adjust a data element if the student s unusual circumstances warrant it. We will discuss PJ adjustments later in the lesson. Let s begin our discussion with updates of dependency status. Dependency Status Any time a student s dependency status changes during the award year, it must be updated unless the change is a result of a change in the student s marital status. When a change in dependency status would be due to a change in the student s marital status, updating generally is not permitted. Otherwise, updating dependency status is required regardless of whether or not the student was selected for verification. All other associated FAFSA information must also be updated at the time of the dependency status update. Example. Kat earned her baccalaureate degree at the end of the fall semester. Kat knows that if she takes a break, she probably will not go on to get her graduate degree. She applies and is admitted at her alma mater for her Master of Business Administration degree in the spring of that same award year. As a graduate student, Kat is no longer considered a dependent student. She must update her FAFSA to show her graduate student status and, in doing so, update her dependency status. Example. Dak filed the FAFSA as a dependent student using only his mother s information, because his father passed away several years ago, and she never remarried. After filing the FAFSA, Dak s mother passed away. His dependency status changes because his only surviving parent has passed away; therefore, he must update his FAFSA to reflect his independent status as an orphan. Only Dak s information is now used to award Title IV aid. If Title IV aid was previously awarded, it must be adjusted to reflect his new independent status for the award year. On the other hand, if Dak s parents were divorced and his father were still alive when his mother passed away, Dak s dependency status would not change. Since the FAFSA was filed prior to the death of the mother, the FAFSA would not be updated using the father's information. Dak would still have a surviving parent, so he remains a dependent student. His mother's income would not be replaced by his father's. Dak s mother would be exempt from verification requirements, however. Any exception to this can be done only by using PJ. The student's circumstances may have changed as a result of his mother's death to the extent that a PJ adjustment would better reflect the student's ability to pay. FAFSAs for future award years would be filed using the father's information, until the student is otherwise independent. The institution may choose to update or require the student to update her dependency status due to a change in her marital status, if it determines Verification: Lesson NASFAA

113 the update is necessary to address an inequity or to reflect more accurately the student s ability to pay for her education. Updates that are allowed due to a change in the student s marital status are discussed shortly. Dependency status, household size, and number in college must be updated in certain circumstances. Household Size and Number in College Updates Due to Verification The household size and number in college must be updated for students selected for verification, unless the update is due to a change in the student s marital status. Household size and number in college must be updated to be accurate at the time verification is completed, whether the applicant is chosen for verification by the CPS or the institution. Example. Ezekiel is a married independent student who listed three household members and two in college on the FAFSA. At the time of filing the FAFSA, Ezekiel s nephew was living with and being supported by them. Ezekiel s wife intended to attend graduate school along with Ezekiel. At the time of verification, Ezekiel s nephew had moved back in with Ezekiel s sister, and she had resumed support of her child. Ezekiel s spouse also had been denied admission to graduate school. When completing verification, Ezekiel must list only two in the household with one in college on his verification documents, and the school must submit the updates to both household size and number in college to the CPS for reprocessing. The financial aid administrator is allowed to update or may require the student to update his household size and number in college after verification has been completed, if there is a change in the student s marital status that warrants special consideration. Updates Not Due to Verification For students who are not selected for verification, the number in the household and the number in college generally cannot be updated for changes which occur after filing the original application. However, the financial aid administrator is allowed to update or may require the student to update household size and number in college if there is a change in the student s marital status that warrants special consideration. Change in Marital Status Change in Student s Marital Status As stated earlier, updates to a student s marital status generally are not allowed. A financial aid administrator may choose to update or require a student to update dependency status, household size, and/or number in college due to a change in student marital status if the aid administrator determines the update is necessary to address an inequity, or to more accurately reflect an applicant s ability to pay educational costs. The school may also set a deadline for when this type of update can be made. If such a dependency status update is made, household size and number in college must be updated to be consistent with the change in marital status. All other pertinent information, such as spousal income and taxes paid, also must be updated at that time. Example. Adam is 21 and in his final year at Freedom University. During the summer, he proposed to his long-time girlfriend, Mandy, with the intent to marry upon graduating. He filed his FAFSA correctly in January as a dependent student and included his parents information, even though he and Mandy were already living together. However, Adam and Mandy just couldn t wait and they married in June, before the start of the academic year, but after the FAFSA had been filed NASFAA Verification: Lesson 2 111

114 The financial aid administrator at Freedom University may choose to allow Adam to update his dependency status, household size, and number in college based on the change in marital status. If so, Adam becomes independent for the applicable award year and his income and asset information is used for the award year. Mandy s income and asset information also must be included at that time. Note that you cannot update the marital status of an already independent student whose dependency status has not changed because of her marriage or divorce, and who was not selected for verification. In such a case, you must select the student for verification if you want to exercise your discretion to update her marital status and all other associated information. Updates to dependency status, household size, and number in college due to a change in the student s marital status to address an inequity or to more accurately reflect the applicant s ability to pay educational costs are permitted in 34 CFR (c) of the verification regulations. Therefore, such updates are not considered to be PJ adjustments. This means verification does not need to be completed before making adjustments to these data elements under these circumstances. marital status or income and asset data after the FAFSA is filed. However, because the application was selected for verification (by the CPS or school), you must update the parent s household size and number in college (but not the parent s marital status, income, or assets) to be correct at the time verification is completed. The financial aid administrator could then choose to exercise PJ to make any necessary adjustments to parental income and assets (but not marital status) if the aid administrator believes there are unusual circumstances warranting such changes. The Verification Updates chart on page 126 makes a handy resource. Change in Dependent Student s Parents Marital Status A dependent student s parents marital status cannot be updated after the FAFSA is filed. The institution or student must only update household size and number in college if a dependent student s parent remarries after the application, but before verification is complete. However, the new stepparent s income or assets would not be included unless the school utilizes PJ, which will be discussed in the next portion of the lesson. For example, the FAFSA was completed while the parents were still married in January, but the parents divorced in February prior to verification. The student was selected for verification, including household size and number in college. Because the FAFSA is considered to be a snapshot of the family s financial situation as of the date the FAFSA was submitted, the parents cannot update their Verification: Lesson NASFAA

115 Quick Quiz 2 Now it s time to check what you have learned so far. Answer the following questions and check your responses using the Answer Key on page An update is a change to data elements that were incorrect at the time the FAFSA was filed. True False 2. What items can be updated on the FAFSA under certain conditions? 3. A school may allow an update to marital status under which of the following circumstances? (check all that apply) To address an inequity To more accurately reflect the student s ability to pay educational costs For a student in special circumstances For a dependent student s parents after verification is completed in special circumstances 4. Household size and number in college may be updated only for applicants selected for verification. True False 2017 NASFAA Verification: Lesson 2 113

116 Learning Activity: Can an Update Be Made? Review the following scenarios. Based upon what you learned, decide if an update can be made, and why or why not. Assume PJ is not being used in any of these scenarios. Check your answers using the Answer Key on page Jasmine was selected for verification. All necessary documentation was submitted and verification was completed. The next month, Jasmine s mother goes to the courthouse to marry her longtime love. Can an update be made? Yes No Why or why not? 2. Desmond completed his undergraduate program at the end of the summer session in July. He is scheduled to begin his graduate program at the same institution in September. Summer marked the beginning of his institution s academic year. Can an update be made? Yes No Why or why not? 3. Tina is an incoming freshman at Associate Community College. There are four people in her household her mother, her father, and her twin sister Toya. When Tina filed her FAFSA in January, Toya decided she was going to work for a few years first, before deciding whether she would attend college. As a result, Tina only included herself in the number in college. Tina s FAFSA was selected for verification in August, and Toya made the decision to also attend Associate Community College. Tina has not yet completed verification. Can an update be made? Yes No Why or why not? Verification: Lesson NASFAA

117 Reflection Questions Take a few moments to reflect on the following questions. There are no right or wrong answers. You can also discuss these questions with a coworker in your office. 1. How does your institution handle changes in dependency status? Do students self-report or do you flag changes on student ISIRs? 2. Do you think it is fair that parental data associated with a change in marital status can only be updated if the dependent applicant is selected for verification? Why or why not? 3. For what reason may you deny an update due to a change in an applicant s marital status? 2017 NASFAA Verification: Lesson 2 115

118 Professional Judgment Adjustments Definition The Higher Education Act of 1965 (HEA), as amended, provides the authority for financial aid administrators to exercise discretion in a number of areas when a student has special or unusual circumstances. Decisions are made on a case-by-case basis. This authority is known as professional judgment, sometimes referred to as PJ. Changes made to FAFSA data elements by a financial aid administrator exercising her PJ authority are called adjustments. Utilizing Professional Judgment The use of PJ is optional and at the discretion of the institution. PJ adjustments must be made on the basis of accurate specified-year data. Remember from Lesson 1 that statute states the specified year (or base year) is the calendar year that immediately precedes the first year in the award year covered by the FAFSA (i.e., the prior year), or the year prior to that year, known as the prior-prior year (PPY). Through the end of the award year, prior-year data is used to complete the FAFSA. Beginning with the award year, PPY tax and income data is used to complete the FAFSA. This means the specified year for both the and award years is You may be wondering what are special or unusual circumstances for purposes of PJ? Section 479A(a) of the HEA defines special circumstances as conditions that differentiate an individual student from a class of students rather than conditions that exist across a class of students. The law provides examples of some of the situations that may constitute use of professional judgment if special circumstances exist which warrant their consideration. These include: Tuition expenses at an elementary or secondary school; Medical, dental, or nursing home expenses not covered by insurance; Unusually high child care or dependent care costs; Unemployment of a family member or an independent student; A student or family member who is a dislocated worker; The number of parents enrolled at least half time in a degree, certificate, or other program leading to a recognized educational credential at a Title IV-eligible institution; Housing status that results in an individual being homeless; or Other changes in a family s income, a family s assets, or a student s status. Each of these examples, by itself, is not a sufficient reason for exercising PJ. The financial aid administrator must be able to document the special circumstances associated with the example in order to exercise PJ. The financial aid administrator must then document the case-by-case nature of the special circumstance along with his reasons for exercising PJ in the student s file. Before making PJ adjustments, financial aid administrators must verify required specified-year data elements on applications selected for verification by the CPS or the institution and resolve any conflicting information. Verification documentation, corrected data, and the reason for the PJ adjustment must be noted in the student s file. Occasionally, a subsequent ISIR transaction is selected for verification, when the earlier transactions were not selected. There are edits that prevent subsequent transactions on which a financial aid administrator made a PJ adjustment from being flagged for verification in the future. Alternative-year income data (or nonspecified-year data) used to recalculate the EFC do not need to be verified. The alternative-year figures are an estimate and, in most cases, documentation to substantiate the estimate is not available before awards must be made. The institution must maintain documentation in the student s file of alternative-year data used to recalculate the EFC. In Dear Colleague Letter GEN-16-03, ED reminds financial aid administrators of their authority to exercise PJ to address the special circumstances Verification: Lesson NASFAA

119 that may arise for families because of the implementation of the use of PPY tax and income information beginning with the award year. ED expects there to be some increase in the use of PJ, since adjustments to income may need to be made to more accurately reflect the student s and families current financial circumstances. Example. For the award year, Witten requested special consideration due to reduced income in 2016 compared to His school s financial aid administrator exercised PJ, and used 2016 alternative-year income for Now that 2015 income information is being used again for , the family is concerned that Witten s aid will be based on the higher 2015 income again. The school must collect updated information, which means the school must decide whether to confirm the amounts from 2016, or to request income estimates for Either approach would be acceptable. The aid administrator must document his determination in the student's file and indicate that PJ was used when submitting ISIR adjustments to the CPS. If the circumstances persist from one year to the next, the aid administrator can use the same documentation again, but only if it fully supports the continued use of PJ based on the same alternativeyear income. More guidance on PJ can be found in Chapter 5 of the Application and Verification Guide of the FSA Handbook and NASFAA s Self-Study Guide: Professional Judgment. Before making PJ adjustments, financial aid administrators must verify required specifiedyear data elements on applications selected for verification by the CPS or the institution and resolve any conflicting information. The ability to use PJ does not change due to the use of PPY income. The financial aid administrator can exercise PJ to use alternative-year income for any 12-month period deemed appropriate to adequately address the family's financial circumstances. If the aid administrator feels that 2016 or even 2017 income more appropriately reflects the family's circumstances, then he may exercise PJ to use 2016 income again (instead of 2015 income), or 2017 alternative-year income for the award year NASFAA Verification: Lesson 2 117

120 Quick Quiz 3 Now it s time to check what you have learned so far. Answer the following questions and check your responses using the Answer Key on page Financial aid administrators must use professional judgment for special circumstances. True False 2. If a student is selected for verification, the student must be and any conflicting information before professional judgment is performed. 3. Define specified year. 4. The specified-year data for the award year is for The institution is required to maintain documentation to substantiate any PJ decisions that are made. True False 6. The HEA identifies which of the following as examples of special circumstances for which the financial aid administrator may exercise PJ on a case-by-case basis? (check all that apply) Housing status that results in an individual being homeless Unemployment of a family member or an independent student Medical expenses that are covered by insurance Elementary and secondary school tuition expenses Unusually high child care or dependent care costs A student or family member who is a dislocated worker The number of parents enrolled at least half time in a degree, certificate, or other program leading to a recognized educational credential at a Title IV-eligible institution Verification: Lesson NASFAA

121 Learning Activity: Professional Judgment and Verification Review the following scenarios and answer the accompanying questions. Each applicant has been selected for verification. Check your answers using the Answer Key on page During the verification process, Shruti, a first-year student, reveals that her mother is also enrolled halftime at the institution. Normally, parents are not included in the number in college. Can the institution use professional judgment to include Shruti s mother in college? Yes No Why or why not? 2. Terrell, a third-year independent student, was selected for verification in the V1 verification tracking group. He used the IRS Data Retrieval Tool to transfer his 2015 income tax data into his FAFSA. He notifies his financial aid counselor that he has lost his job at the local bottling plant in early 2016 and has been unable to find work since that time. Can the institution use professional judgment to account for Terrell s loss of income? Yes No Why or why not? 3. After verification is complete, Chris speaks to his financial aid counselor regarding medical expenses his family has accumulated. However, all of the expenses, with the exception of a few copays, have been covered by insurance. Chris parents used a flexible spending account provided by an employer to cover the copays. Can the institution use professional judgment to account for the medical expenses? Yes No Why or why not? 2017 NASFAA Verification: Lesson 2 119

122 Reflection Questions Take a few moments to reflect on the following questions. There are no right or wrong answers. You can also discuss these questions with a coworker in your office. 1. Does your institution use PJ? If so, what circumstances does your institution consider for PJ? If not, why? 2. Why do you think PJ may be a good tool to use? 3. How do you think PJ may be used incorrectly? 4. Why do you think there may be an increase in the use of PJ resulting from the use of prior-prior year (PPY) data? Verification: Lesson NASFAA

123 NASFAA Verification Checklist for NAME: Student ID: Verification Tracking Group: V1 V4 V5 Verification information requested: Date: Date: ISIR/SAR Transaction Number: Date: Date: VERIFICATION ITEM APPLICATION/ SAR/ISIR DATA VERIFIED DATA VERIFICATION SOURCE Number in Household Number in College IRS DRT used and unchanged: Yes No (If yes, skip completing tax filer income) Other IRS documentation used: Yes No List: Parent Income reported? Yes No AGI (tax filers) $ $ U.S. income tax paid (tax filers) $ $ Income earned from work for parent 1 (nontax filers) $ $ Income earned from work for parent 2 (nontax filers) $ $ Untaxed income (tax filers): Untaxed IRA distributions $ $ Untaxed portions of pensions $ $ Education tax credits $ $ IRA deductions and payments $ $ Tax-exempt interest $ $ 2017 NASFAA Verification: Lesson 2 121

124 VERIFICATION ITEM APPLICATION/ SAR/ISIR DATA VERIFIED DATA VERIFICATION SOURCE Student Income reported? Yes No AGI (tax filers) $ $ U.S. income tax paid (tax filers) $ $ Income earned from work for student (nontax filers) $ $ Income earned from work for student s spouse (nontax filers) $ $ Untaxed income (tax filers): Untaxed IRA distributions $ $ Untaxed portions of pensions $ $ Education tax credits $ $ IRA deductions and payments $ $ Tax-exempt interest $ $ High School completion Yes No Yes No Identity/Statement of Educational Purpose Yes No Do corrections need to be sent to CPS? Is there a change in a nondollar item? If yes, must submit corrections to CPS. Is there a change in a single dollar item of $25 or more? If yes, must submit corrections to CPS. Yes No Yes No Verification Results Cost of Attendance $ Cost of Attendance $ - EFC before Verification - EFC after Verification = Need before Verification $ = Need after Verification $ Verification: Lesson NASFAA

125 Award Changes Award Before Verification After Verification Federal Pell Grant (or IASG) $ $ TEACH Grant $ $ FSEOG $ $ FWS $ $ Federal Perkins Loan $ $ Direct Subsidized Loan $ $ Direct Unsubsidized Loan $ $ PLUS $ $ Other aid: $ $ $ $ $ $ $ $ Date verification results sent to: Corrections submitted to CPS: Date corrections submitted CPS: Date corrected ISIR/SAR received from CPS: Yes No 2017 NASFAA Verification: Lesson 2 123

126 Verification Corrections Definition: Corrections are changes to data elements that were incorrect at the time the FAFSA was filed. In many situations when corrections are made to application data, the institution or student must submit those corrections to the CPS for reprocessing before the student can be paid. The table below indicates situations resulting from verification where corrections must be submitted and situations where the submission of corrections is optional. The institution may elect to submit all corrections to the CPS. If the data on the application agree with the verification documentation provided, and the institution has a valid ISIR or SAR, the institution may award and disburse aid as appropriate. Situation Submission of Corrections to CPS Required? Comments Subsidized Student Financial Assistance Programs No errors in nondollar items or no change to a single dollar item of $25 or more Change in a single dollar item of $25 or more Errors in any nondollar items (e.g., household size, number in college) No Yes Yes If applicant (or spouse or parents, if applicable) did not file and is/are not required to file a federal tax return, income earned from work is used in lieu of AGI Difference may be positive or negative Difference may be positive or negative Federal Pell Grant Program Change in a single Yes dollar item of $25 or more Errors in any nondollar items (e.g., household size, number in college) Yes Difference may be positive or negative Institution must recalculate applicant s eligibility using EFC on corrected, valid SAR or ISIR Institution can disburse additional funds only if it receives a valid SAR or ISIR for the applicant and the applicant s eligibility increased as a result of recalculation Institution must resolve an overaward if recalculation reduces the eligibility used to make an interim disbursement Institution must resolve overpayment if recalculation reduces eligibility for disbursed funds Institution must recalculate applicant s eligibility using EFC on corrected, valid SAR or ISIR Institution can disburse additional funds only if it receives a valid SAR or ISIR for the applicant and the applicant s eligibility increased as a result of recalculation Institution must resolve an overaward if recalculation reduces the eligibility used to make an interim disbursement Institution must resolve overpayment if recalculation reduces eligibility for disbursed funds Verification: Lesson NASFAA

127 Situation Submission of Corrections to CPS Required? Comments Campus-Based Programs and Direct Subsidized Loans Change in a single dollar item of $25 or more Errors in any nondollar items (e.g., household size, number in college) Yes Difference may be positive or negative Institution must adjust applicant s financial aid using EFC on corrected valid SAR or ISIR Institution must resolve an overaward if recalculation reduces the eligibility used to make an interim disbursement Institution must comply with procedures to resolve a campus-based overaward that is not part of an interim disbursement $300 campus-based overaward tolerance is allowed only if the overaward occurs after campus-based aid was awarded Any campus-based overaward over $300 must be resolved Institution must comply with procedures for excess Direct Subsidized Loan proceeds that are not part of an interim disbursement Yes Institution must adjust applicant s financial aid using EFC on corrected, valid SAR or ISIR Institution must resolve an overaward if recalculation reduces the eligibility used to make an interim disbursement Institution must comply with procedures to resolve a campus-based overaward that is not part of an interim disbursement $300 campus-based overaward tolerance is allowed only if the overaward occurs after campus-based aid was awarded Any campus-based overaward over $300 must be resolved Institution must comply with procedures for excess Direct Subsidized Loan proceeds that are not part of an interim disbursement 2017 NASFAA Verification: Lesson 2 125

128 Verification Updates Definition: Updates are changes to data elements that were correct at the time of application, but have changed since the FAFSA was filed. General rule about updating: Information that was correct as of the date the application was filed cannot be changed. Exceptions to the general rule: Dependency status, household size, and number in college must be updated in certain circumstances. Those circumstances are described in the table below. If the institution makes a disbursement to a student based on information that is later updated, it must use the updated information to determine the correct awards. To ensure the student receives the correct awards, the institution must adjust the prior disbursement, future disbursements, or both (if necessary). Data Element Which Students? Updates Required and When? Institution Required to Submit Updates to CPS? Dependency Status Household Size/Number in College All students Update required any time dependency status changes during the award year, unless the change is a result of a change in the student s marital status, in which case updating generally is not permitted Required regardless of whether the student was selected for verification Institution may choose to update or require applicant to update dependency status due to a change in the student s marital status if it determines the update is necessary to address an inequity or to reflect more accurately the applicant s ability to pay educational costs Only those students selected for verification, except in special circumstances Updates to household size and number in college are required at the time of verification, unless the change is due to a change in student s marital status, in which case updating generally is not permitted Institution may update or require applicant to update household size and number in college due to a change in the student s marital status if it determines the update is necessary in special circumstances to address an inequity or to reflect more accurately the applicant s ability to pay educational costs If the institution updates or requires an applicant to update dependency status due to a change in student marital status, it must also update: The student s household size and number in college; and All other pertinent information, including income and assets Subsidized Student Financial Assistance Programs: Yes Subsidized Student Financial Assistance Programs: Yes Verification: Lesson NASFAA

129 Data Element Which Students? Updates Required and When? Institution Required to Submit Updates to CPS? Household Size/Number in College (cont d) Only those students selected for verification, except in special circumstances An already independent student s marital status cannot be updated unless the student is selected for verification by the CPS or the institution Updating is not permitted once verification is completed, unless the institution subsequently makes updates due to a change in the student s marital status to address an inequity or to reflect more accurately the applicant s ability to pay educational costs Subsidized Student Financial Assistance Programs: Yes 2017 NASFAA Verification: Lesson 2 127

130 Lesson 2 Answer Keys Quick Quiz 1 1. What is a correction? Corrections are changes to data elements that were incorrect at the time the FAFSA was filed. 2. What makes a SAR or ISIR valid? All of the information used to calculate the applicant s expected family contribution (EFC) is accurate and complete. 3. A school must submit corrections to the CPS for changes in a single dollar item of $25 or more. True False 4. How are overawards treated differently for the campus-based programs than for other federal programs, such as the Federal Pell Grant Program? There is an overaward tolerance of $300 for the campus-based programs. 5. What does Comment Code 399 indicate? ED has compared the last ISIR transaction with the ISIR transaction and determined there may be conflicting information between the two that could result in a significant change in the student s EFC when resolved. If so, the CPS will flag the ISIR with Comment Code 399, informing the institution that it must review the student s record, collect documentation, and resolve the possibly conflicting information Verification: Lesson NASFAA

131 Learning Activity: Corrections 1. Damaris is a dependent, second-year student. Before the FAFSA was filed, Damaris and her family moved. Since her FAFSA was a renewal, the old address carried over. She used the IRS Data Retrieval Tool successfully. She was selected for verification and is eligible for subsidized aid. The institution completed verification, but noticed on all of Damaris documentation, her address was different. She explained that she moved before the FAFSA was filed, but that the old address carried over on the renewal. Is this correction: Optional Required Why? All nondollar FAFSA data must be corrected and sent to the CPS for reprocessing, even if it does not affect the calculation of the EFC. 2. Timothy is in his last year of college. He has never been selected for verification until now. In previous years, his EFC had been just outside of the range for the Federal Pell Grant. This year, his EFC plummeted and he is now Pell-eligible, despite the fact that 2015 tax and income information was used to complete both the and FAFSA. He initially reported four people in his household size, but on the verification form, he reported seven. His family had been supporting his aunt and her two children since December of the prior year after she lost her job and her apartment building was destroyed in a fire. Is this correction: Optional Required Why? It was an error in a nondollar item in this case, household size NASFAA Verification: Lesson 2 129

132 Quick Quiz 2 1. An update is a change to data elements that were incorrect at the time the FAFSA was filed. True False 2. What items can be updated on the FAFSA under certain conditions? Dependency status, number in household and number in college, and student s marital status. 3. A school may allow an update to marital status under which of the following circumstances? (check all that apply) To address an inequity To more accurately reflect the student s ability to pay educational costs For a student in special circumstances For a dependent student s parents after verification is completed in special circumstances 4. Household size and number in college may be updated only for applicants selected for verification. True False Verification: Lesson NASFAA

133 Learning Activity: Can an Update Be Made? 1. Jasmine was selected for verification. All necessary documentation was submitted and verification was completed. The next month, Jasmine s mother goes to the courthouse to marry her longtime love. Can an update be made? Yes No Why or why not? The change to marital status occurred after verification was complete. 2. Desmond completed his undergraduate program at the end of the summer session in July. He is scheduled to begin his graduate program at the same institution in September. Summer marked the beginning of his institution s academic year. Can an update be made? Yes No Why or why not? As a graduate student, Desmond is no longer a dependent student and his dependency status must be updated to reflect this change. 3. Tina is an incoming freshman at Associate Community College. There are four people in her household her mother, her father, and her twin sister Toya. When Tina filed her FAFSA in January, Toya decided she was going to work for a few years first, before deciding whether she would attend college. As a result, Tina only included herself in the number in college. Tina s FAFSA was selected for verification in August, and Toya made the decision to also attend Associate Community College. Tina has not yet completed verification. Can an update be made? Yes No Why or why not? Since Tina s application was selected for verification, the number in college must be updated to reflect her sister s decision to attend college, as well NASFAA Verification: Lesson 2 131

134 Quick Quiz 3 1. Financial aid administrators must use professional judgment for special circumstances. True False 2. If a student is selected for verification, the student must be verified and any conflicting information resolved before professional judgment is performed. 3. Define specified year. The specified year is the calendar year that immediately precedes the first year in the award year covered by the FAFSA (i.e., the prior year), or the year prior to that year, known as the prior-prior year (PPY). The specified year for is 2015 (i.e., the PPY). 4. The specified-year data for the award year is The institution is required to maintain documentation to substantiate any PJ decisions that are made. True False 6. The HEA identifies which of the following as examples of special circumstances for which the financial aid administrator may exercise PJ on a case-by-case basis? (check all that apply) Housing status that results in an individual being homeless Unemployment of a family member or an independent student Medical expenses that are covered by insurance Elementary and secondary school tuition expenses Unusually high child care or dependent care costs A student or family member who is a dislocated worker The number of parents enrolled at least half time in a degree, certificate, or other program leading to a recognized educational credential at a Title IV-eligible institution Verification: Lesson NASFAA

135 Learning Activity: Professional Judgment and Verification 1. During the verification process, Shruti, a first-year student, reveals that her mother is also enrolled halftime at the institution. Normally, parents are not included in the number in college. Can the institution use professional judgment to include Shruti s mother in college? Yes No Why or why not? The parent may be included in the number in college if he or she is enrolled at least half-time in an eligible degree, certificate, or other recognized educational credential at an eligible institution, if the financial aid administrator can document accompanying special circumstances which warrant including her mother in college. 2. Terrell, a third-year independent student, was selected for verification in the V1 verification tracking group. He used the IRS Data Retrieval Tool to transfer his 2015 income tax data into his FAFSA. He notifies his financial aid counselor that he has lost his job at the local bottling plant in early 2016 and has been unable to find work since that time. Can the institution use professional judgment to account for Terrell s loss of income? Yes No Why or why not? Loss of income for the academic year can be accounted for using PJ based on the special circumstances surrounding Terrell s unemployment. Verification just needs to be completed before the income adjustments are made. 3. After verification is complete, Chris speaks to his financial aid counselor regarding medical expenses his family has accumulated. However, all of the expenses, with the exception of a few copays, have been covered by insurance. Chris parents used a flexible spending account provided by an employer to cover the copays. Can the institution use professional judgment to account for the medical expenses? Yes No Why or why not? This is not a special circumstance, and PJ cannot be used to include expenses which are covered by another source such as insurance NASFAA Verification: Lesson 2 133

136 NOTES: Verification: Lesson NASFAA

137 Lesson 3: Disbursements, Timeframes, and Policies and Procedures Learning Objectives After completing this lesson, you will know: A school s options for making interim disbursements; Other program-specific disbursement requirements; The timeframes and deadlines associated with verification; The consequences of verification tracking group changes; and The policies and procedures a school should have in place regarding verification. Key Concepts The key concepts you will learn in this lesson: Interim disbursements; Overpayments; Other program-specific disbursement requirements; Award cycle; Verification deadlines; Verification tracking group changes; and Policies and procedures. Lesson 1 of this self-study guide introduced you to verification, including whose application must be verified, the selection process, and acceptable documentation. Lesson 2 focused on changes to applicant data, including the use of professional judgment (PJ). In this lesson, you will learn about additional topics important to your understanding of verification, including interim disbursements, other program-specific disbursement requirements; timeframes, and policies and procedures. Let s look at interim disbursements first. Interim Disbursements Definition An interim disbursement is a disbursement a school may make, under certain conditions, prior to completing the verification process. The regulations give schools the flexibility to make such disbursements to better meet student needs and to address unexpected delays in completing verification. Making interim disbursements is optional; schools may always withhold payment until verification is complete. Conditions for Making an Interim Disbursement Prior to Verification Except for the Federal Direct Student Loan (Direct Loan) Program, the institution has the option to make interim disbursements prior to the completion of verification if no conflicting information exists and it has no reason to believe the application information is inaccurate. After Verification, but Prior to Receipt of Output Documents You may also make interim disbursements after completing verification but before receiving a valid Student Aid Report (SAR) or Institutional Student Information Report (ISIR), if you determine corrections will not change an applicant s Title IV awards. You should also be aware that your options for making interim disbursements vary by Title IV program, and that the interim disbursement options apply only to the subsidized federal student aid programs. Interim disbursement rules do not apply to the unsubsidized 2017 NASFAA Verification: Lesson 3 135

138 Resources for This Lesson Interim Disbursement Eligibility Decision Tree Flowcharting Verification Policies and Procedures Verification Results and Institutional Requirements Glossary Icons You will see the following icons in Lesson 3: Key concept Quick quiz Reflection questions Learning activity Helpful hint aid programs, but other program-specific rules apply. We ll get to those shortly; for now, let s review the program-specific interim disbursement rules. The subsidized Title IV programs include Federal Pell Grants, Federal Supplemental Educational Opportunity Grants (FSEOGs), Federal Work-Study (FWS) funds, and Direct Subsidized Loans. The unsubsidized Title IV programs include Direct Unsubsidized Loans, parent and student PLUS, Teacher Education Assistance for College and Higher Education (TEACH) Grants, and Iraq and Afghanistan Service Grants (IASGs). Program-Specific Interim Disbursement Requirements Federal Pell Grants, Federal Supplemental Educational Opportunity Grants, and Federal Perkins Loans For the Federal Pell Grant, FSEOG, and Federal Perkins Loan programs, you may make a single interim disbursement for the first payment period pending the completion of verification. Federal Work-Study Under the FWS Program, a school may employ a student selected for verification for up to 60 consecutive days after the student enrolls. A student s earnings during this time period are considered an interim disbursement for provisional employment. If verification is not completed by the end of the 60-day period, the school must end the student s employment under the FWS Program. Direct Subsidized Loans Direct Subsidized Loans are need-based aid. Before verification is completed, you may originate a loan, but not disburse it (keep in mind a school can hold funds for a limited time). If you have completed verification and are waiting to receive a valid SAR or ISIR, you can both originate and disburse the loan. The Interim Disbursement Eligibility Decision Tree on page 153 will help you determine whether or not a student is eligible to receive an interim disbursement. Student Deemed Ineligible for Interim Disbursement After making an interim disbursement to a student, you may determine he was not eligible to receive the funds. The interim disbursement becomes an overpayment if: Verification shows the student was not eligible for those funds; Verification: Lesson NASFAA

139 Verification was not completed before the appropriate deadline; or The school does not receive a valid SAR or ISIR reflecting corrections within the deadline specified in the regulations. The campus-based programs include the Federal Perkins Loan, FSEOG, and FWS programs. To learn more about these types of Title IV aid, check out NASFAA s The Campus-Based Programs Self-Study Guide. The institution must eliminate any Federal Pell Grant, Federal Perkins Loan, and/or FSEOG overpayments by either: Adjusting subsequent disbursements in the award year in which the overpayment occurred; or Reimbursing the appropriate Title IV program account by requiring the student to return the funds to the institution. If it cannot eliminate the overpayment by reducing subsequent disbursements or having the student return the funds, the institution must use its own funds to make restitution to the appropriate Title IV program account by the earlier of 60 days after the student s last day of attendance or the last day of the award year for which the funds were disbursed. If it permits provisional FWS employment for up to 60 days, the institution is liable for any overpayment it is unable to recover by adjusting other aid. The institution must reimburse the FWS Program account from its own funds. Students still must be paid for any work performed from institutional payroll funds, and they cannot be required to repay any FWS earnings (except in cases of fraud). In the end, an institution is liable and must repay any overpayment from an interim disbursement that it is unable to recover from the student or by reducing subsequent disbursements during the award year. An overpayment is any financial aid paid to a student in excess of the amount he is eligible to receive. Repaying the funds can be the responsibility of either the student or the school, depending on the situation. A student with an outstanding overpayment is ineligible for additional Title IV funds. If a student has awards from any of the campus-based programs, you may be able to resolve the overpayment by applying the $300 overaward tolerance applicable to those programs. Refer to the Verification Results and Institutional Requirements, charts A and B, starting on page 155. These charts are attached to the October 31, 2016 Electronic Announcement Changes in Verification Tracking Groups (Updated March 3, 2017). They outline the requirements for adjusting Title IV aid when the expected family contribution (EFC) changes as a result of verification. For additional guidance on how to resolve overpayments, refer to Volume 4, Chapter 3 of the FSA Handbook. You will 2017 NASFAA Verification: Lesson 3 137

140 learn about the deadlines associated with verification later in this lesson. If the institution makes interim disbursements after completing verification, but before receiving the corrected and reprocessed valid SAR or ISIR from the Central Processing System (CPS) prior to the award year processing deadlines published in the Federal Register, the school is entirely liable for any Title IV overpayments and must: Reimburse the appropriate Title IV account from institutional funds; and Pay the student for any FWS hours worked from institutional funds. Other Program-Specific Disbursement Requirements Along with the flexibilities associated with interim disbursements for the subsidized Title IV programs, there are other disbursement requirements and limitations associated with verification. Before we discuss those, remember the general rules from Lesson 1: If the student is eligible for aid only from the unsubsidized Title IV programs, the student is exempt from verification, unless she is subject to verification of high school completion, identity, and Statement of Educational Purpose in verification tracking groups V4 or V5; If the student is eligible for aid from both the subsidized and unsubsidized Title IV programs, the student cannot circumvent verification by accepting only unsubsidized aid; and If the student is selected for verification or moved to another verification tracking group after she is no longer enrolled at the institution, verification of the new tracking group is not required to be completed. Remember, if an individual is only eligible for unsubsidized Title IV aid and selected for verification tracking group V5, she needs to verify only high school completion, identity, and Statement of Educational Purpose. She does not need to verify any other FAFSA information, including income, household size, or number in college. Title IV Grants and Federal Perkins Loans If the school is not exercising the interim disbursement option and the student is selected for verification in any verification tracking group, no further disbursements of Federal Pell Grant, IASG, FSEOG, TEACH Grant, or Federal Perkins Loan funds can be made until verification is completed. The school does not need to return any previously disbursed funds while waiting for verification to be completed; however, if verification is never completed, the student (not the school) must return all Title IV grant and Federal Perkins Loan funds disbursed before the student was selected for verification. Federal Work-Study If the school is not exercising the interim disbursement option, and the student is selected for verification, the student must cease FWS employment until verification is completed. The school does not need to return any previously earned funds while waiting for verification to be completed. If verification is never completed, neither the student nor the school must repay any FWS earnings paid to the student before she was selected for verification; no further FWS employment may occur, however. Direct Subsidized Loans As pointed out earlier, a school cannot make a Direct Subsidized Loan disbursement before verification is completed; however, it can make an interim Direct Subsidized Loan disbursement after verification and before receiving a valid SAR or ISIR. If the school is not exercising this interim disbursement option, and if the student is selected for verification, no further Direct Subsidized Loan funds may be disbursed until verification is completed. If the student never completes verification for verification tracking group V1, neither the student nor the school must return any Direct Subsidized Loan funds that were disbursed before the student was selected for verification, and no further loan disbursements can be made. If the student never completes verification for verification tracking groups Verification: Lesson NASFAA

141 V4 or V5, the student (not the school) must return all Direct Subsidized Loan funds, including those already disbursed before the student was selected for verification. High school completion, identity, and Statement of Educational Purpose, which are verified in tracking groups V4 and V5, are potential student eligibility issues that always must be verified if the student is selected for verification of V4 or V5 while still enrolled at the institution. If verification of these items is never completed, all Title IV aid must be returned by the student, except FWS funds already earned. Direct Unsubsidized Loans and PLUS Direct Unsubsidized Loans and parent or student PLUS are non-need-based aid and not subject to interim disbursement rules. If a student is not otherwise receiving any need-based Title IV aid, and the student is not selected for V4 or V5, the school does not have to complete verification before originating and disbursing these loans. However, a student cannot circumvent verification requirements by choosing to borrow a Direct Unsubsidized Loan instead of a Direct Subsidized Loan, if the student is eligible for both. If a student attempts to do this, the school should require the student to complete verification. The school may, on a case-by-case basis, disburse Direct Unsubsidized Loan and/or PLUS funds to applicants who are in verification tracking group V1 if the school determines there will be a delay in the completion of verification. If it disburses unsubsidized loans under these conditions, the school must ensure that the subsidized aid the student is estimated to receive is taken into consideration when determining the amount of unsubsidized loans to be disbursed. After verification is completed, the institution must make any necessary adjustments to both the subsidized and unsubsidized Title IV aid the student is receiving for the award year, as well as return any funds for which the student is no longer eligible due to verification. If the student never completes verification for verification tracking group V1, neither the student nor the school must return any Direct Unsubsidized Loan or PLUS funds that were disbursed before the student was selected for verification; no further Direct Loan disbursements can be made. If the student never completes verification of high school completion, identity, or Statement of Educational Purpose in tracking groups V4 or V5, the student (not the school) must return all Direct Unsubsidized Loan and PLUS funds, including those loan funds already disbursed before the student was selected for verification. For additional information, refer to the Verification Results and Institutional Requirements, charts A and B, starting on page 155. Verification Tracking Group Changes As mentioned in Lesson 1, there are certain situations when a student s verification tracking group changes. These situations include when the application: Is not selected for verification initially, and then is subsequently selected for verification tracking group V1, V4, or V5; or Was previously selected for verification tracking group V1, and then subsequently selected for V5. ED provided guidance for these special situations in the October 31, 2016 Electronic Announcement. The attachment containing the Verification Results and Institutional Requirements charts can be found starting on page 155. It will assist in determining what actions must be taken when: The student fails to complete verification (as previously discussed); Verification has been completed and there is no EFC change; or Verification resulted in a change to the EFC. Take a few minutes to review the Verification Results and Institutional Requirements charts before proceeding with the lesson NASFAA Verification: Lesson 3 139

142 Quick Quiz 1 Now it s time to check what you have learned so far. Answer the following questions and check your responses using the Answer Key on page Define interim disbursement. 2. A school must make interim disbursements if the student is eligible. True False 3. Which of the following Title IV programs are subject to the interim disbursement regulations and, therefore, may be disbursed or paid before verification is completed? (check all that apply) Federal Pell Grant Federal Perkins Loan Direct Subsidized Loan Federal Work-Study Iraq and Afghanistan Service Grant 4. Define overpayment. 5. What options does a school have for resolving an overpayment caused by an interim disbursement? Verification: Lesson NASFAA

143 Quick Quiz 1 (cont d) 6. Which of the following applies if the student never completes verification of high school completion, identity, and Statement of Educational Purpose in verification tracking groups V4 or V5 (if selected while still enrolled)? The student must return all Direct Subsidized Loan and Direct Unsubsidized Loan funds, including those already disbursed before the student was selected for verification The school must return all Direct Subsidized Loan and Direct Unsubsidized Loan funds, including those already disbursed before the student was selected for verification The student can keep any Direct Unsubsidized Loan funds, but must return any Direct Subsidized Loan funds disbursed before the student was selected for verification The student can keep any Direct Subsidized Loan and Direct Unsubsidized Loan funds that were disbursed before the student was selected for verification, but no further loan disbursements can be made 7. Which of the following applies if the student never completes verification for verification tracking group V1? The student must return all Direct Subsidized Loan and Direct Unsubsidized Loan funds disbursed before the student was selected for verification, and no further Title IV disbursements may be made after the student is selected for verification The school must return all Direct Subsidized Loan and Direct Unsubsidized Loan funds disbursed before the student was selected for verification, and no further Title IV disbursements may be made after the student is selected for verification The student must return any Title IV grant and Federal Perkins Loan funds disbursed before the student was selected for verification, and no further Title IV disbursements may be made after the student is selected for verification The school must return all Title IV grant and loan funds disbursed before the student was selected for verification, and no further Title IV disbursements may be made after the student is selected for verification 8. If the school cannot eliminate a Federal Pell Grant or Federal Perkins Loan overpayment by reducing subsequent disbursements within the same award year or having the student return the funds, the institution must use its own funds to make restitution to the appropriate Title IV program account by the earlier of days after the student s last day of attendance or the last day of the award year for which the funds were disbursed NASFAA Verification: Lesson 3 141

144 Learning Activity: Interim Disbursements Review the following scenario and answer the accompanying questions. Check your work using the Answer Key on page 160. Amelia will be a first-year student at Big Sky University (BSU) in the fall of BSU s goal is to notify incoming students of their financial aid awards by January 2, so students have the information well in advance of the deadline for responding to BSU s admissions offer. In order to achieve this goal, the financial aid office does not complete verification before awarding newly admitted students. Big Sky University tentatively awarded Amelia the following aid for the award year: Program Award Amount Federal Pell Grant $5,920 Federal Supplemental Educational Opportunity Grant (FSEOG) $500 Federal Work-Study (FWS) $2,000 Direct Subsidized Loan $3,500 Presidential Scholarship $5,000 Amelia s parents separated in March 2017 and are in the middle of a contentious divorce. They both want custody of Amelia s younger brother and disagree over how to pay for Amelia s college education. As a result, the financial aid office was unable to complete verification before the fall semester started on September Under what conditions could BSU make interim disbursements to Amelia? 2. If BSU makes interim disbursements to Amelia, which Title IV funds could it disburse? Verification: Lesson NASFAA

145 Learning Activity: Interim Disbursements (cont d) 3. Amelia is anxious about earning some money to help cover personal expenses, so the financial aid office places her in a FWS position at the library. On what date will Amelia have to stop working through the FWS Program if BSU does not complete verification? 4. On September 22, Amelia sees her financial aid counselor. Amelia tells her counselor that she has decided to decline her Direct Subsidized Loan and would like to borrow a Direct Unsubsidized Loan instead, in case it takes her longer than anticipated to complete her bachelor s degree. BSU has yet to complete verification. May Amelia borrow a Direct Unsubsidized Loan now? Why or why not? 2017 NASFAA Verification: Lesson 3 143

146 Reflection Questions Take a few moments to reflect on the following questions. There are no right or wrong answers. You can also discuss these questions with a coworker in your office. 1. Do you think interim disbursements are a good idea? Why or why not? 2. What issues should a school consider before making interim disbursements? 3. Do you agree with the regulatory provision allowing schools to originate but not disburse a Direct Subsidized Loan before completing verification? Why or why not? Verification: Lesson NASFAA

147 Verification Timeframes As you will see from the following discussion, schools have a great deal of discretion in establishing the various timeframes associated with the verification process. Verification and the Award Cycle Schools have quite a bit of flexibility when it comes to integrating verification into the award cycle. The award cycle is the series of steps from receiving application information to awarding Title IV aid an institution uses to determine a student s eligibility for financial aid. An institution s decision depends on a number of factors, including its resources and procedures. You should also consider when the verification process would be the least disruptive to office functions and the least problematic for students. Verification can occur: On receiving an application (usually a student s ISIR); Before making a tentative award offer; After making a tentative award offer, but before confirming awards; After a student accepts an aid offer but before making any disbursements; or After making a first (or interim) disbursement, but before making a second disbursement for applicable programs. Verification Deadlines If selected for verification, a student must complete the verification process by the specified deadline or forfeit Title IV eligibility, except as specified earlier. Deadlines for the verification process are established by both the institution and the U.S. Department of Education (ED). Institutional Deadlines Applicants must submit all verification documents by the institutionally established deadline. If an applicant fails to provide required documentation by the school s deadline, the school must return certain aid and/or cease pending disbursements in accordance with the program-specific disbursement requirements discussed earlier for the various verification tracking groups. However, you have some flexibility if an applicant submits verification documentation after the school s established deadline. You may choose to accept the documentation and, if the student is otherwise eligible, award Title IV aid. Example Reverifying Tax Extension Filers. In Lesson 1, we discussed the fact that an institution may choose to have a policy to reverify an applicant who was previously verified, based on tax extension documentation. If the student then fails to submit the IRS Data Retrieval data or tax transcript by an institutionally established deadline, there are ramifications. The student must return all Title IV grant and Federal Perkins Loan funds disbursed before the student was selected for verification. Direct Subsidized Loans, Direct Unsubsidized Loans, and PLUS funds disbursed, and FWS wages earned, before the student was selected for verification do not have to be returned. No further Title IV aid disbursements can occur. If the student does provide the required tax data, and the verified information results in an EFC increase, all disbursements and FWS wages must be based on the results of the verified transaction NASFAA Verification: Lesson 3 145

148 Action must be taken to eliminate any resulting overpayment by reducing subsequent disbursements during the award year or loan period (for Direct Loans), and the student must return any disbursed Title IV grant and Perkins Loan funds for which he is no longer eligible. Any previously disbursed Direct Loan funds, as well as FWS wages, may be retained by the student. If, on the other hand, the EFC decreases as a result of the new tax data, the student may be eligible for additional Title IV aid, and it must be disbursed based on the results of the verified transaction. must comply with other program-related deadlines, such as submitting award origination, disbursement, and adjustment records to the Common Origination and Disbursement (COD) System. Refer to the Verification Results and Institutional Requirements, Chart C, on page 157 for additional guidance for tax extension filers and verification requirements. In addition to verification deadlines set by the institution, you need to be aware of programspecific deadlines established by ED. Federal Pell Grant Deadlines You must have all required verification documentation, as well as a valid SAR or ISIR, before the earlier of 120 days from the student s last day of attendance or the final award year processing deadline published annually in the Federal Register. If you do not receive these items by the applicable deadline, the student forfeits her Federal Pell Grant and must return any funds previously disbursed for the payment period. As of the publication of this guide, deadlines for the award year had not been published. Campus-Based and Direct Loan Programs Deadlines For the campus-based and Direct Loan programs, verification is complete when a student has submitted all requested documentation by the deadline published in the Federal Register, or an earlier deadline established by the institution. Because the TEACH Grant, IASG, Direct Unsubsidized Loan, and PLUS programs are not subject to verification, verification deadlines do not apply. However, you Verification: Lesson NASFAA

149 Quick Quiz 2 Now it s time to check what you have learned so far. Answer the following questions and check your responses using the Answer Key on page Define award cycle. 2. All schools must complete verification at the same point in the award process, as determined by ED each year. True False 3. Schools can complete verification: (check all that apply) When a student applies for admission When a student s application (SAR or ISIR) is received At a time selected by the student Before making a tentative award offer After making a first but before making a second disbursement 4. What happens if a student fails to submit required verification documents by an institution s established deadline? 5. What documentation must the school have in its possession before the final ED-established award year processing deadline in order for a student to avoid forfeiting a Federal Pell Grant award due to verification being incomplete? 2017 NASFAA Verification: Lesson 3 147

150 Learning Activity: Interview Interview colleagues in your office to answer the following questions: 1. What is your institution s deadline for submitting verification documentation? Are there different deadlines for different students? 2. Will your school award aid to an otherwise eligible student if he or she submits verification documentation after your school s deadline? Yes No Why or why not? 3. How does your school publicize verification deadlines to students? Are these methods effective? Verification: Lesson NASFAA

151 Verification Policies and Procedures The final verification-related topic you should understand is policies and procedures. Policies and procedures are important to ensure an institution completes verification consistently and and in a timely fashion. Having clearly written policies and procedures makes maintaining them easier if and when verification selection criteria, tracking groups, and documentation requirements change each year. Let s begin the discussion with a review of what constitutes a policy versus what is a procedure. Policies and Procedures Policy A policy is a statement of how a school will address or handle a particular topic. Example policies include Blue Sky University verifies all first-time freshmen and Ivy Woods College will award aid to otherwise eligible students if verification documentation is submitted after its published deadline. University verifies all first-time freshmen, the school might have the following procedures: 1. Beginning January 2 of each year, the assistant director will run a weekly report to identify newly-admitted freshmen. 2. Each student will be flagged for verification in the financial aid management system (FAMS). 3. The FAMS will generate a letter to each student detailing requested documentation and deadlines for submission. 4. As documents are received, they are scanned into the student s financial aid record. 5. Once all documentation is received, the file is queued for review by a verification specialist. 6. The specialist completes verification and submits corrections to the CPS for reprocessing. 7. The specialist flags the student s record for award packaging by the associate director when the corrected ISIR transaction is received back from the CPS. Required Policies and Procedures An institution must establish and implement verification policies and procedures in certain areas as discussed below. The verification regulations provide you with a number of options regarding policies and procedures. Institutions must develop policies to address issues for which flexibility is provided. All policies must be made clear to students and must be consistently applied. Selection Procedures Procedure On the other hand, a procedure or procedures is the process a school uses to implement a particular policy. Let s use one of our sample policy statements to illustrate. To implement the policy Blue Sky An institution must outline its policies and procedures for selecting applicants for verification, including those selected by the CPS or by the school itself. If the institution selects applicants or data elements for institutional verification (beyond federal requirements), its policies and procedures should detail how and why the applicants and data elements are identified and selected for verification. An institution electing to verify all applicants should include a simple statement to that effect in its policies and procedures manual, rather than a list of criteria NASFAA Verification: Lesson 3 149

152 Additionally, the institution should document its policies and procedures regarding the resolution of conflicting information. Information Shared with Selected Applicants The institution must clearly explain, in a timely manner, to each selected applicant the: Documentation needed for verification requirements; and Applicant s responsibilities with respect to verification, including deadlines and the consequences of failing to complete any required action. You must provide the written notification to an applicant of the results of verification in a timely manner. Developing good policies and procedures is challenging. The resource, Flowcharting Verification Policies and Procedures on page 154, illustrates how to create policies and procedures using flowcharts. For additional assistance on developing policies and procedures, you might want to use the NASFAA P&P Builder, which is available in the NASFAA Compliance Engine under Tools & Resources at Applicant Verification Document Submission The institution s policies and procedures must: State the timeframe the applicant has to submit any requested verification documents; and Provide the consequences of not providing documentation within the specified timeframe. Post-Verification Procedures Finally, an institution s verification policies and procedures must include post-verification procedures. The institution s policies and procedures must: Indicate the procedures the school and the applicant must follow to correct application information the institution finds erroneous; Provide the method for notifying the applicant if the EFC changes as a result of verification and results in a change in her Title IV aid eligibility; Outline the procedures used to refer an overpayment resulting from verification to ED; Detail the procedures for referring cases of suspected fraud or other criminal misconduct in connection with the application to ED s Office of Inspector General; and Provide that, if an applicant is selected for verification, verification must be completed before it exercises its PJ authority Verification: Lesson NASFAA