As lawmakers return to the nation’s capital for the final session of the 113th Congress, among the items on their to-do list is addressing the fate of the so-called “tax extenders package.” This group of fifty-five tax breaks has been routinely extended by Congress each year prior to 2014, yet they were allowed to expire at midnight on December 31, 2013 and so far have not been revived despite interest from many members of both political parties.
The hesitancy to grant this diverse group of tax provisions new life (provisions that include an allowance for supplies teachers buy for their classrooms, a measure promoting business research and development, a credit important to the alternative energy industry, and an allowance for NASCAR track owners) stems from the staggering cost of the package- estimated to be upwards of $80 billion for two years. The expired credit most pertinent to higher education financing is the "Above-the-Line Deduction for Qualified Tuition and Related Expenses.” This deduction allows eligible taxpayers to deduct up to $4,000 in tuition expenses as an above-the-line exclusion from income.
While the Internal Revenue Service (IRS) has not yet announced the official start date of the 2015 tax season, observers of the federal government are speculating that a delay is possible as a result of the uncertainty surrounding the extenders package. Last year the start of tax season was delayed until January 31 as a lingering effect of the government shutdown.
Earlier this fall, IRS Commissioner John Koskinen sent a letter to lawmakers indicating that a continued delay on passing the extenders package may “force the IRS to postpone the opening of the 2015 filing season and delay the processing of tax refunds for millions of taxpayers." Coupled with sequestration funding cuts to the agency and additional oversight responsibilities related to the Affordable Care Act, Koskinen is expecting an unusually complicated and “miserable” tax season, according to remarks made at an event held by the American Institute of Certified Public Accountants.
Should the start of tax filing season be delayed, that would in turn delay the availability of data through the Department of Education’s (ED) data retrieval tool (DRT) for the 2015-16 FAFSA. The DRT typically goes live in the first week in February. However, since tax data is generally not available for retrieval for at least three weeks after a tax return is electronically filed, a delay in the start of filing would push the tax information available for retrieval back to late February or beyond. Likewise, any filing delays experienced by individual taxpayers as a result of the diminished customer service capacity of the IRS could impact the availability of data in the IRS-DRT.
NASFAA has long advocated for a move to using prior-prior year (PPY) income information on the FAFSA, instead of using prior-year data as is done currently. Making this policy change would go a long way to alleviate the impact of potential issues such as this one because a delay in tax filing would not impact a family’s ability to complete financial aid applications using the DRT. PPY is already authorized in law, so the federal government has the authority to implement a switch to PPY but has not yet taken action.
In the event of tax filing and DRT delays, NASFAA members should be prepared to hear from students and families concerned about meeting appropriate deadlines. We will continue to monitor both the status of the tax extenders legislation and any announcements from the IRS and will share updates through Today’s News as they become available.
Publication Date: 11/19/2014