Editor's Note: This article, originally published 1/9/2019, was updated on 1/28/2019 to reflect new, clarifying information provided to NASFAA by ED regarding treatment of amended tax filers and victims of identity theft.
The Department of Education (ED) released guidance on the verification process on Wednesday, January 9 in an effort to that would decrease the burden on students, families, and financial aid administrators and ensure easier access to federal financial aid.
In an Electronic Announcement, ED wrote that it would allow copies of tax returns and written statements of non-filing to be accepted for verification purposes in lieu of obtaining IRS tax return transcripts and verification of non-filing (VONF) forms for both the 2018-19 and 2019-20 application years. This guidance is effective for all verifications conducted on or after January 9, 2019, regardless of FAFSA processing date.
Schools have been eagerly awaiting this guidance since it was announced by ED at the Federal Student Aid (FSA) conference in November, and issues with verification have compounded recently as the IRS “Get Transcript” service has been offline for scheduled maintenance since the end of 2018.
Going forward, a signed copy of either an individual's 2016 or 2017 income tax return, depending on application year, is acceptable documentation for verification of income for tax filers. According to the new guidance, students or parents do not need to prove or provide a written statement that they attempted to obtain their tax return transcript or use the IRS Data Retrieval Tool (DRT). Schools are still able to use information imported directly from the IRS DRT or tax return transcripts as documentation for verification.
Independent applicants and parents of dependent students who are subject to verification of nonfiling (VONF) requirements will still need to obtain proof from the IRS that they did not file taxes. However, the new guidance allows individuals who are unable to secure that document to submit to the school a signed statement certifying that they did attempt to obtain the VONF from the IRS and were unable to do so, and that they did not file a 2016 or 2017 income tax return, as applicable.
Schools have flexibility on the format of the written statement, but it needs to be signed by the non-filer. For example, the non-filer could simply submit a signed attestation, or the school could provide a form with standard language about attempts to obtain the VONF that the non-filer only needs to sign. Given the flexibility provided by ED, NASFAA is not seeking additional clarification in this area.
Independent students and parents who had income for those years, but did not have to file an income tax return must list the amount of income from each source, and include a copy of IRS Form W-2 from each source.
Under the guidance, students and parents granted an extension beyond the automatic six-month extension who are required to file a 2016 or 2017 income tax return may submit the following for verification:
Signed statement that certifies the individual was unable to secure VONF documentation from the IRS, that they did not file a 2016 or 2017 income tax return, and includes a list of sources of income and the amount of any income;
Copy of filed IRS Form 4868 for the appropriate tax year;
Copy of the IRS’s approval of an extension beyond the automatic six-month extension for the appropriate tax year; and
Copy of any IRS Form W–2s for each source of 2016 or 2017 employment income received
ED has clarified that the new guidance also applies to individuals who filed an amended income tax return with the IRS. Now, financial aid administrators can accept a signed copy of the IRS Form 1040X that was filed with the IRS for the applicable tax year or documentation from the IRS that include the change(s) made to the tax filer’s tax information by the IRS, in addition to one of the following--
IRS Data Retrieval Tool information on an ISIR record with all tax information from the original applicable year income tax return;
A transcript obtained from the IRS that lists the tax account information of the tax filer(s); or
A signed copy of the IRS Form 1040 that was filed with the IRS.
For victims of identity theft, ED has confirmed that schools should continue to ask applicants to obtain a copy of the Tax Return DataBase View (TRDBV) transcript. However, in accordance with the new guidance, if the applicant is unable to obtain the TRDBV, then the school may accept a signed copy of the paper tax return (as long as the school has no reason to doubt the identity of the applicant). ED guidance still requires the applicant to submit a signed statement indicating that they were victims of IRS-tax related theft and that the IRS has been made aware. The 2019-20 Application and Verification Guide contains instructions on how the applicant can notify the IRS.
Publication Date: 1/9/2019