By Jill Desjean, NASFAA Policy & Federal Relations Staff

Last month, the Internal Revenue Service (IRS) announced an upcoming change to federal tax return transcripts, to become effective on Sept. 23, 2018. The format change is driven by a desire to protect sensitive taxpayer data and, to that end, transcripts will now contain partially redacted personally identifiable information (PII) such as name, Social Security number, and addresses. Financial information, such as those line items needed to perform verification, will not be redacted. The format change will impact all transcripts, whether retrieved online or by mail, and will be effective for all tax years.

Institutions will likely need to examine or revise internal procedures for matching tax return transcripts to student records given the fact that they will now only see the first four characters of the tax filer’s last name and the last four digits of their Social Security number on the transcript. For instance, instructions to aid applicants might need to be revised to direct them to write the student’s name and school ID number or other identifiers on tax transcripts prior to submitting them to the financial aid office. Alternatively, institutions may choose to take advantage of the new optional 10-digit Customer File Number that will be added to the transcript request form (Form 4506-T). The Customer File Number would then appear on the tax transcript and allow for easier identification of the tax filer and matching to student records.

The change to the transcript format does not impact the IRS Data Retrieval Tool (DRT) or the transcript request process. IRS has also published a frequently asked questions document to address concerns about the new tax transcript format. The Department of Education plans to issue an announcement about the changes to the tax transcript in the near future, and NASFAA will also review and, if necessary, update its Tax Transcript Decoder tool.

Publication Date: 9/26/2018

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