“Other Untaxed Income” will be added to the list of verification items for the 2014-15 application year, as announced by the Department of Education (ED) in a Federal Register notice and Dear Colleague Letter (DCL) GEN-13-16.
2014-15 Information to Be Verified
The 2014–2015 FAFSA verification items are the same as those for the 2013–2014 award year with one addition – Other Untaxed Income (Question 45 for the student and Question 94 for dependent student’s parents on the FAFSA).
If the financial aid administrator determines that the amounts provided and verified from Question 45, Question 94, and from other income information (e.g., adjusted gross income, income earned from work, untaxed income not included on the FAFSA) do not appear to provide sufficient financial support for the number of household family members reported, the applicant and, if appropriate, the applicant’s parents or spouse must explain how the family was financially supported during the 2013 calendar year.
Some schools have voluntarily contacted applicants whose family income as reported on the FAFSA appeared to be insufficient and requested further explanation regarding means of financial support, but ED is now explicitly requiring this follow-up for those applicants selected by the Central Processing System (CPS) to verify other untaxed income.
Schools that have voluntarily followed-up with applicants who reported extremely low income have found that in many instances, the applicant is being supported by financial resources that are not reported on the FAFSA as a result of the College Cost Reduction and Access Act (CCRAA) of 2007. Examples of financial resources that are not reported on the FAFSA include welfare benefits, the earned income tax credit, additional child tax credit, untaxed Social Security benefits, and Supplemental Security Income.
For applicants required to verify untaxed income, acceptable documentation consists of:
• A signed statement that lists the sources of other untaxed income and the amounts of income from each source for tax year 2013; and
• A copy of IRS Form W–2 for each source of employment income received for tax year 2013.
For other verification items, the Federal Register and DCL make a few modifications and provide additional clarification and guidance on acceptable documentation. One of the more significant changes concerns situations where the school questions a claim that a tax filer has not, will not, and is not required to file a federal tax return. Historically, schools were required to resolve this conflicting information, but it was left to the school to decide what constituted acceptable resolution of the conflict.
The new guidance in the Federal Register and DCL states that if an institution questions a claim that the tax filer has not, will not, and is not required to file a 2013 Internal Revenue Service (IRS) income tax return, the institution must require the applicant to submit a “Verification of Nonfiling” from the IRS that the tax filer did not file a 2013 IRS income tax return. The request for “Verification of Nonfiling” can be obtained by the tax filer using IRS Form 4506-T and checking box 7. According to the IRS, a response to the request for a “Verification of Nonfiling” for the 2013 tax year will not be issued until after June 15, 2014.
Verification Tracking Groups
ED will continue to use verification tracking groups as a method to indicate which verification items apply to an individual applicant. The 2014-15 verification tracking groups are very similar to the 2013-14 verification groups, with two significant changes:
• Applicants will no longer be assigned to verification tracking group V2 (SNAP-Food Stamps). However, SNAP-Food Stamps must be verified for applicants placed in verification tracking groups V1, V4, V5, and V6. The V2 verification tracking group will not be in use for the 2014-15 application year.
• A new verification tracking group, V6 Household Resources Verification Group, will be used for applicants who are required to verify other untaxed income, in addition to other verification items.
Paper Tax Returns
An institution may accept a signed paper copy of a 2013 income tax return for verification purposes only in very limited circumstances, as prescribed by ED.
On August 21, 2012, ED issued guidance in an Electronic Announcement on the limited circumstances when a signed copy of an income tax return or other documentation is acceptable for completing verification for individuals who (1) filed an amended IRS income tax return; (2) were victims of IRS identity theft; or (3) filed non-IRS income tax returns. This guidance continues to be in effect for the 2014–2015 award year and subsequent award years until further notice.
If necessary, ED will provide updated guidance on the acceptable documentation for individuals who are unable to use the IRS Data Retrieval Tool or to obtain an IRS Tax Return Transcript due to authentication issues with the IRS following the period after the IRS processes 2013 income tax returns. Until such guidance is provided, an institution may not accept a signed paper copy of a 2013 income tax return to complete verification.
More Guidance to Come
NASFAA has sent several clarifying questions to ED staff and will pass along responses when we receive them.
At the NASFAA conference, ED will be offering an interest session on verification, including 2014-15 verification. The session is offered on Sunday, July 14 at 2:30 pm and on Monday, July 15 at 1:30 pm.
Publication Date: 6/18/2013