Transcript No Slide Title

Verification
A Verification Funny
“I told a student we needed his Independent
Verification Worksheet and his IRS tax form.
My front desk person got a laugh when the
student called to see if we’d received his
Declaration of Independence and his 10-W40!”
Federal Verification Topics
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Definition and background.
Resolving inconsistencies.
School’s required policies.
Required verification items.
Documentation requirements.
Federal Verification Topics
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Finalizing the verification process.
Verification “tolerance.”
Verification blunders.
Some “not so easy”
case studies.
Verification Defined
 Process of proving the accuracy of
information reported on the FAFSA.
 Summarized as a review of the base-year
income information on FAFSA.
Purpose of Verification
 To resolve or correct information mistakenly
reported on the FAFSA.
 To deter the reporting of false or fraudulent
information.
 Above all, to assure that eligible applicants
receive the correct types and amount of
financial assistance.
Verification
 30 percent of
FAFSAs submitted
are selected by the
CPS.
 School must follow
federal procedures to
collect and verify
necessary
documentation.
Verification
 Required only for certain applicants.
 Schools may verify the application
information of any student.
 Such students are subject to the same
verification requirements as CPS-selected
students.
 School selection criteria should be applied fairly
and consistently.
Verification versus
Resolving Inconsistencies
 The requirement to resolve conflicting data is
separate and distinct from the verification
requirements.
 School must have system in place to identify
and resolve conflicting information.
 School cannot disburse aid until discrepancies
are resolved.
Tax Knowledge
 Who is required to file a tax return.
 What is the correct tax filing status.
 Person cannot be claimed as a dependent
twice.
 No assets, but have income from assets.
Required School Policies
 Deadlines for documentation submission and
consequences of the failure to meet those
deadlines.
 Method of notifying students of award
changes due to verification.
 Required correction procedures for students.
Required School Policies
 Means of publicizing requirements and
procedures.
 Standard procedures for referring
overpayment cases to U.S. Department of
Education.
Written Requirements
 Documentation.
 Documents and information needed.
 Student Responsibilities.
 Includes deadlines, consequences of missing
deadlines and correction procedures.
 Notification Methods.
 How the school will notify students of award
changes and time frame for such notification.
Five Required Verification Items
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Household size.
Number enrolled in college.
Adjusted gross income (AGI).
US income tax paid.
Certain untaxed income and benefits.
 Note: School may choose to verify any other
items.
Documentation Requirements
 Federal Verification Worksheet.
 School may use verification worksheet.
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Not required - May create your own.
Most schools use federal worksheet.
 School may also require other documentation.
 Sample worksheets on pages 12-15.
Household Size
 Includes any persons who
are dependents of, or who
receive more than half of
their support from, the head
of the student’s household
(either the student or the
student’s parents).
 Documentation:
Verification worksheet or
signed statement.
Household Size
 Cases when verification is not required:
 Student’s SAR/ISIR document is received by
school within 90 days of the date application
was signed.
 Verified HH Size Last Year = This Year’s HH
Size.
Household Size
 Cases when verification is not required:
 Dependent student .
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Married Parents and HH Size = 3.
Single Parent and HH Size = 2.
 Independent student:
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Married and HH Size = 2.
Single and HH Size = 1.
Number Enrolled in College
 Always include student.
 Parents are excluded unless included via
professional judgment.
 Others may be included if:
 Part of the household size.
 Attending a post-secondary (Title IV aid-granting)
institution at least half-time.
 Seeking a degree or credential.
Number Enrolled in College
 Documentation: Verification worksheet or
signed statement.
 Signed statement may be combined with
household size statement.
 If school doubts enrollment information
reported, it should require additional
supporting documentation.
Number Enrolled in College
 Cases when verification is not required:
 Student’s SAR/ISIR is received by school within
90 days of the date application was signed.
 Number in College = 1 (only the student).
 All members in the household are enrolled at
the same institution and the school can verify
this with its own records.
AGI and Tax Paid
 Most common documentation = signed copy
of federal tax return.
 Many ways to file taxes.
 Using traditional paper forms.
 Electronically (e-file).
 Tax documents needed for verification vary
depending on filing method.
AGI and Tax Paid
 If tax returns are unavailable:
 Can accept any IRS form that lists tax account
information.
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IRS Letter 1722.
RTFTP - computerized tax return summary by IRS
Regional Service Centers.
Other IRS tax account summaries.
 Verification requirements for tax-filing
extensions.
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W-2 forms.
IRS approval of request for tax-filing extension.
Copies of federal tax returns when filed.
AGI and Tax Paid
AGI and Tax Paid
AGI and Tax Paid
 Not reported for non-filers.
 Must verify income earned from work.
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Verification worksheet.
Signed statement certifying non-filing status and
sources and amounts of income .
W-2 forms.
AGI and Tax Paid
 The Department now requires financial-aid
administrators to “have a fundamental
understanding of relevant tax issues that can
considerably affect the need analysis.”
Untaxed Income
and Benefits
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Social Security benefits.
Child support.
IRA/Keogh deductions.
Foreign income exclusion.
Earned income credit.
Interest on tax-free bonds.
Untaxed Income and Benefits
 Except for child support, can be verified on
tax return or alternative tax documents.
 Can be reported on the verification
worksheet.
Untaxed Income and Benefits
 Non-filers should submit verification
worksheet or signed statement.
 School must verify all other untaxed
income on tax returns and W-2s.
Untaxed Income and Benefits
 In-kind income that should not be reported on
the FAFSA nor verified:
 Food stamp program.
 Food distribution program.
 National school lunch and school breakfast
programs.
 Commodity supplemental food program.
 Special milk program for children.
 Rollover pensions.
Untaxed Income and Benefits
 In-kind income that should not be reported on
the FAFSA nor verified:
 Daycare provided by the Social Services BlockGrant programs.
 WIA (formerly JTPA) benefits.
 Payments and services received from states for
foster care or adoption assistance.
 Women, Infants and Children (WIC) Program.
Untaxed Income and Benefits
 Social Security benefits.
 Aid administrator not required to verify unless
he/she believes benefits were received and not
reported or reported incorrectly.
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Documentation from the Social Security
Administration.
Signed statement from the student (spouse, parent if
applicable).
Untaxed Income and Benefits
 Child support received.
 Does not have to be verified if equals verified
amount from previous year.
 School can accept:
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Verification worksheet.
Signed statement confirming amount received for all
children.
If paid through a government agency, a statement
from that agency.
Untaxed Income
and Benefits
 Child support received.
 If school doubts
information/
documentation
provided.
 Options listed.
Untaxed Income and Benefits
 Foreign income excluded from US taxation:
 Can deduct excessive living expenses or
exclude income received from abroad.
 Deducted for tax purposes but considered
untaxed income for student aid purposes.
 Verified using IRS Forms 2555 (line 43) or
2555EZ (line 18).
Untaxed Income and Benefits
Finalizing the Verification
Process
 May award and disburse aid if verification
documentation matches all information
reported on the FAFSA.
 If verification reveals errors or
inconsistencies, corrections usually have to
be made, unless “tolerance” is allowed.
Verification Tolerance
 Allows for minor application dollar amount
errors that do not significantly affect the
student’s aid eligibility.
 Not allowed for errors in non-dollar items,
such as household size.
Verification Tolerance
 Limit of $400.
 Examples.
Verification Tolerance
Examples on Calculating Tolerance
Example 1:
Original (Uncorrected) Dollar Items
$2,500 (AGI)
+ 300 (untaxed income)
$2,800
- 300 (tax paid)
$2,500 (total)
Correct(ed) Dollar Items
$3,000 (AGI)
+ 300 (untaxed income)
$3,300
- 400 (tax paid)
$2,900 (total)
$2,500 (uncorrected total)
-2,900 (corrected total)
$ 400 (net difference)
The net difference of $400 is within tolerance. Therefore, no recalculation is necessary and
aid may be disbursed.
Example 2:
$2,500 (uncorrected total)
-2,900 (corrected total)
$ 400 (net difference)
Verification Tolerance
The net difference of $400 is within tolerance. Therefore, no recalculation is necessa
aid may be disbursed.
Example 2:
Original (Uncorrected) Dollar Items
$2,500 (AGI)
+ 300 (untaxed income)
$2,800
- 300 (tax paid)
$2,500 (total)
Correct(ed) Dollar Items
$3,500 (AGI)
+ 300 (untaxed income)
$3,800
- 400 (tax paid)
$3,400 (total)
$2,500 (uncorrected total)
-3,400 (corrected total)
$ 900 (net difference)
The net difference of $900 is not within tolerance. Corrections must be made and
recalculation is necessary.
Verification Blunders
 Failing to resolve conflicting information.
 Incomplete or undocumented verification
procedures in the FAO’s policy and
procedure manual.
 Verification not documented or incomplete.
 Collecting tax returns up-front and not
completing verification.
Verification Blunders
 Failing to obtain tax returns from both
parents of a dependent student when the
parents are married, report dual income
information on the application, but file
separate tax returns.
 Accepting income documentation from the
non-custodial parent and spouse to verify the
student’s application.
Verification
Blunders
 Failing to obtain the tax
return of an independent
student’s spouse.
 Accepting a tax return with
the preparer’s name and
address typed without
obtaining a valid signature
or stamp.
Verification Case Studies
Four “Not So Easy” Cases
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1: The Case of the Mysterious HH Size.
2: Diane’s Dilemma --Taxes ‘R Us.
3: The Case of the Wedding Bell Blues.
4: Bill and His “Separated” Mom.
Verification