Transcript Verification - Welcome | SWASFAA

Arlene Odenwald
Assistant Director
Financial Aid and Scholarship Services
Central New Mexico Community College
1
What These Slides Cover
 30% Verification Criteria
 Quality Assurance Program
 Which data elements must be verified?
 What’s new about untaxed income?
 Conflicting Information
 Immigration
 Verification Exclusions
2
Administrative Burden
 “More than three in four college financial aid offices
reported an increase in the number of cases where they
must verify information on the Free Application for Federal
Student Aid (FAFSA), according to NASFAA's latest QuickScan Survey. The increase in the number of verification
cases was more likely to affect two-year colleges and lowincome students.
 Some schools have had to take action to cope with the
increase in verification cases this year. Nearly half (49
percent) said they have implemented the 30 percent cap on
completing verification for student aid applicants…”
 NASFAA Survey Shows Administrative Burden Increasing for
Financial Aid Offices: Posted 12/07/09 to www.nasfaa.org.
3
Calculating 30 percent Step by Step
 Step 1: Define applicants
 ED does not regulate the definition of applicant
 Institution must develop its own definition
 Examples—Applicant can be:



Anyone who applies to the school
Anyone who is enrolled
Anyone enrolled & eligible to receive aid
 Step 2: Determine total number of applicants at school
 Use historical data
 Safer to overestimate than underestimate
 Revise estimate if necessary during award year
 Step 3: Calculate 30 percent of total number of applicants
4
Quality Assurance Program
 Participation is voluntary
 ED provides guidelines, tools, and incentives for
participation
 Participating schools exempt from prescribed
verification requirements
 School must reassess and self-correct verification
process on an ongoing basis
5
Which Elements Must Be Verified?
 Household size
 Number in enrolled in college
 Cannot automatically include parent, but can exercise
professional judgment to include parents with proper
documentation
 Adjusted Gross Income (AGI)
 U.S. income tax paid
 Certain untaxed income and benefits
6
CRCRAA and Untaxed Benefits
 The College Cost Reduction and Access Act (CCRAA) of 2007
made changes to the definition of untaxed income and benefits.
The CCRAA specifically excludes welfare benefits, the amount of
earned income credit, combat pay, the credit for Federal tax on
special fuels, the amount of foreign income tax excluded from
Federal income taxes, untaxed Social Security benefits, and the
amount of additional child tax credit claimed for Federal income
tax purposes from consideration as untaxed income and benefits
from Need Analysis.
 This means they are excluded from both the calculation of the
EFC and the estimated financial assistance (EFA) when
determining eligibility for Title IV FSA programs. It is also
important to note that stimulus payments received by eligible
taxpayers in 2008 are not considered income on the 2009-10
FAFSA.
7
What Documents Do I Need?
 Most common documents include:
 For taxable income (and some untaxed income)

Base year tax return
 For untaxed income, household size and number in
college

ED or school verification worksheet
 Acceptable documentation listed on page AVG-87.
 Alternative documents may include:
 Official agency documentation
 Institutional verification (number enrolled in college)
 Signed statement
8
General Document Requirements
 Documents can be originals
 Documents can be copies
 --Photocopies, fax, digital printouts
 Signatures on a copy are as valid as original signatures
9
Corrections vs. Updates
 Corrections are changes to data elements that were
incorrect at the time of application
 Updates are changes to data elements that were correct
at the time of application but have since changed
 Dependency override—any time during award year
 Household size and number in college can only be
updated up through the date of verification. If not
selected, cannot be updated.
10
Marital Status
 May not update dependency status, household size, or
number in college if change results from change in
student’s marital status.
 When should one change marital status?
 After filing FAFSA, a married student files for divorce and is
now separated from her husband. The student goes from 3 in
family (husband, wife, and child) to 2 in family( student and
child). During professional judgment, if you do not change
marital status, the CPS treats the second family member as a
spouse and not a dependent. Makes a huge difference in EFC
because Formula B is used instead of Formula C in the EFC
calculation
11
Updating Information and
Professional Judgment
 Institution must complete verification before it
exercises professional judgment to change the EFC of a
student selected for verification
 If using projected-year income data to recalculate EFC,
projected-year data do not need to be verified
12
Tolerance Example: Dependent and
Parent
FAFSA
Parent AGI
Corrected Data
$15,800
$15,500
Parent Untaxed Income
+
1,200
+
1,500
Student AGI
+
9,200
+
9,200
Student Untaxed Income
+
0
+
0
Parent U.S. Taxes Paid
-
500
-
0
Student U.S. Taxes Paid
-
200
-
300
Totals
$25,500
$25,900
13
Changes After Verification
 School must review all subsequent ISIRs received even
if verification has been completed
 NSLDS postscreening
 Student or parent may make a change
 Another school may make a change
 School must also review
 Multiple reporting records (MRRs)


Concurrent enrollment
Potential overawards
 NSLDS transfer monitoring alerts
14
Sources of Conflicting Information
(Other Offices Within Institution)
 Federal regulation requires system to share
information within the institution. This is an
institutional requirement, not just a financial aid
office requirement
 Examples: admissions, registrar, business office,
athletics, veterans, payroll, housing, academic
departments, development office
15
What Is Not Conflicting
Information
 Taxpayer claimed multiple/conflicting credits
 Information included in Box 14 of W-2
 Household size differs exemptions on tax return
 Dependent under IRS rules vs. ED definition of
dependent
 Assumptions made by the CPS
 FAFSA filed using estimated income
 Secondary confirmation match successful, but student
has an expired DHS document
16
Tax Return Basic Knowledge
 Information required to know:
 Minimum income requirements for filing a tax return
 Correct tax filing status for an individual
 A person cannot be claimed as an exemption on more
than one tax return
17
Tax Return Data Conflict
 Some examples that must be resolved:
 Married, but both claimed “head of household”
 Student claimed self as exemption, but so did parent
 A student claims not required to file but earned $30,000
from work
 CPS Reject Code 20 or Comment Codes 126 and 121
 A non-tax filer is reporting an income that is above the
IRS filing requirement
18
What About Head of Household?
 FSA Handbook states we do not need to be tax experts,
but there are some issues that even a layperson with
basic tax information can evaluate, even “head of
household”
 If a student is married at the end of the calendar year
(Dec. 31), student cannot claim head of household
19
BUT a Tax Filer Can Be “Considered
Unmarried”
 If on the last day of the tax year the tax filer meets ALL the following
conditions:
 You file a separate return, defined earlier under Joint Return After Separate
Returns (page 22). By filing Form 1040X, filer can change his filing status.
 You paid more than half the cost of keeping up your home for the tax year
 Your spouse did not live in your home during the last six months of the tax
year
 Your home was the main home of your child, stepchild, or foster child for
more than half the year
 You must be able to claim an exemption for the child. However, you can still
meet this test if you cannot claim the exemption only because the
noncustodial parent can claim the child using the rules described in
Children of divorced or separated parents under Qualifying Child in chapter
3 (page 27), or in Support Test for children of Divorced or Separated Parents
under Qualifying Relative in chapter 3 (page 34). The general rules for
claiming an exemption for a dependent are explained under Exemptions for
Dependents in chapter 3 (page 25).
20
Experiences with Head of
Household
 We have student write a statement explaining why they
should be considered unmarried and a head of household
 Situation: Married couple lives in 2 households because
they own two homes. IRS told us one can file head of
household but the other has to file married because there
were no dependents or exemptions associated with the
person filing as “married.”
 Someone from our office was told by an IRS representative
that the answer to our questions will depend on who’s
answering the telephone.
 Proves necessity of documenting
21
Immigration and Citizenship
 Student must be a lawful permanent resident who is legally
permitted to live and work in the U.S. permanently.
 Or she must be an eligible noncitizen






Refugee
Persons granted asylum
Conditional entrants
Cuban-Haitian entrants
Victims of human trafficking (introduced in 0708)
Persons paroled into the U.S. for at least one year (introduced
in 0708)
 Some persons under the Violence Against Women Act (New
in 0910)
22
Immigration Facts
 Who are we talking about?
 Students or parents who are undocumented, illegal
aliens, illegal immigrants
 About 65,000 undocumented students graduate from
U.S. high schools each year
 Have had access to K-12 education for the last 25 years
23
Immigration and the Applicant
 A student’s eligibility for Title IV aid is based on his status as a
U.S. citizen or eligible noncitizen
 If the student



Was not born in U.S. he or she is not a U.S Citizen
Is not a U.S. permanent resident
Is not an eligible non-citizen
 Then, student is undocumented and is ineligible for federal
student aid
 Will not pass match processes: USCIS or SSN match
 What if student has been living in the U.S. since he was 4
years old?
 States have offered some help
24
States Who Have Offered Help
 Some states have offered in-state tuition
 Texas, California, Washington, Utah, New Mexico,
Nebraska, Oklahoma, Illinois, New York, Kansas

Have passed state laws providing in-state tuition for illegal
aliens who have attended high school in the state for 3 or more
years (finaid.org)
 Some states are going in the other direction
 Georgia, Oklahoma, Colorado, Arizona

Have passed legislation denying in-state tuition rates
(Christian Science Monitor, April 3, 2009)
25
Immigration and a Dependent’s
Parents
 If the dependent student is a U.S. citizen
 The parent of a dependent student does not have to be a
citizen or eligible noncitizen in order for the student to
be eligible to receive Title IV aid
 Parents of Title IV applicants are not required to have
SSNs unless they are applying for PLUS loans
 According to FAFSA instructions, if the parent has no
SSN, 000-00-0000 should be entered in the parent SSN
field
26
What About the 000-00-0000
Number?
 A dependent student’s FAFSA will not be rejected for
lack of a parental SSN if:
 000-00-0000 is listed in the parent SSN field, and
 The parents indicate they have not or will not file a U.S.
tax return
 A dependent student’s FAFSA will be rejected (reject
code J or K) if:
 000-00-0000 is listed in the parent SSN field, and
 The parent’s indicate that they have filed or will file a
U.S. tax return
27
More on the 000-00-0000 Number
 Why are they rejected by the IRS? Because most
people who file taxes have social security numbers
 But some tax filers are not eligible for SSNs; therefore,
the IRS issues Individual Tax Identification Numbers
(ITINs)
 If the information is correct as originally reported, the
school or student can list 000-00-0000 in the parent
SSN field again and resubmit to the CPS for
processing.
28
What About These Tax ID
numbers?
 IRS issues an ITIN to a resident or non-resident alien
who does not have and is not eligible for a Social
Security Number
 ITIN numbers should not be entered in place of the
SSN on the FAFSA
 The use of zeros on the FAFSA by the parent of a
dependent student who does not have a SSN but uses
an ITIN to file a federal tax return is not conflicting
information
29
Verification and Documented
Dependent Students
 If documented dependent student with
undocumented parents
 Is not selected for verification, then there is no issue,
unless there is conflicting information
 Is selected for verification, then


Obtain Verification Worksheet, and
U.S. tax return
30
Verification and Documented
Dependent Students
 If documented student’s parents did not file
 Income should be listed on Verification Worksheet


If income is less than minimum required to file a tax return,
then Verification Worksheet is all that’s needed
 Don’t need W2s.
If income is more than minimum required to file a tax return,
then
 Student’s parents must be asked to file a tax return
31
The Center for Economic Progress
 Is there now a greater risk to taxpayers who use an ITIN?
 The answer appears to be yes. Given the current emphasis on national security, it is easy to
see the temptation to use information about ITIN applicants for the purpose of enforcing
immigration laws. (See Section VII: Current Operating Environment.)
 Will an ITIN become increasingly difficult to apply for and obtain?
 The rules for ITIN application are already more stringent than they were even one year ago.
Whereas in the past, almost anyone without an SSN could obtain an ITIN, current rules
allow only those persons with a verified tax reporting requirement to apply. (See Section
IV: Recent Changes to the ITIN.)
 Will administration of the program include increased information sharing among
governmental agencies?
 The IRS takes privacy laws very seriously but it is not the only agency with access to
information about ITIN applicants. Though there are no current provisions for greater
information sharing within the ITIN program itself, it remains an open issue. (See section
V: IRS Privacy Rules and Confidentiality of ITIN Information.)
 Will administration of the program include assurances to prospective ITIN
applicants and acceptance agents that ITIN usage is secure?
 Simply put, there are no iron clad guarantees. Social service agencies, acceptance agents
and applicants themselves would do well to approach the situation with knowledge of the
risks involved. However, even the IRS recognizes that it is not in their interest as tax
collectors to compromise the privacy of taxpayers.
 Published by the Center for Economic Progress, 2004;
(www.nilc.org/immsemplymnt/ITINs/ITIN_Paper_2004-web.pdf)
32
Common Compliance Issues
 Missing documentation (tax return, verification
worksheets, etc)
 Missing signatures (student, parent, preparer)
 ISIR not reprocessed
 Conflicting documentation not resolved
 Consequences
 Ineligible disbursements
 Over/underawards
 Reconstruction of records
33
Resources for Verification
 Regulations
 34 CFR 668 Subpart E (668.51 to 668.61) and 668.16 (f)
 FSA Handbook
 2009-10 FSAHB Chapter 4
 FSA COACH online
 Verification module of FSA Assessments (Quality
Assurance)
 ISIR Analysis Tool
34
A Good Quote With Which To End
 “In addition, much of the information that institutions
are required to verify are unverifiable, according to a
recent report issued by the President’s Council of
Economic Advisors (CEA) and the National Economic
Council (NEC).”
 NASFAA Survey Shows Administrative Burden
Increasing for Financial Aid Offices: Posted 12/07/09 to
www.nasfaa.org.
35
Verification Exclusions of Entire
Application
 The entire application is excluded verification if the applicant:
 Is not a Title IV recipient (Not making SAP)
 If the student will ONLY receive any of the following Title IV aid:




Unsubsidized Federal Stafford loans or PLUS loans
TEACH Grant
LEAP/SLEAP (otherwise known as SSIG)
Robert C. Byrd Honors Scholarship
 Is incarcerated at time of verification
 Transfers from another institution
 Dies during the award year
 Is an immigrant who arrived in the U.S. during either calendar year
of the award year (that is, 2009 or 2010 for the 2009-10 award year)
36
Verification Exclusions of Entire
Application
 Certain Pacific Island residents

Dependent’s parents must also meet the criteria to quality for
exclusion
 Is a dependent applicant whose



Parents are deceased, or physically or mentally incapacitated,
Parents address is unknown and cannot be obtained by the
applicant,
Parents are residing in a country other than the U.S. and
cannot be contacted by normal means of communication
37
Verification Exclusions of Spousal
Data Only
 Only the independent applicant’s spousal data is
excluded from verification if the applicant’s spouse:
 Is deceased
 Is mentally or physically incapacitated
 Cannot be located because the address is unknown and
cannot be obtained by the applicant
 Is residing in a country other than U.S. and cannot be
contacted by normal means of communication
38
Verification Exclusions of Certain
Data Elements Only
 If the institution receives an ISIR within 90 days of
applicant’s signing the FAFSA institution is not
required to verify
 Household size
 Number in college

Number in household and number in college are two items
that change often from the time of application. Although
these items do not have to be verified under certain
circumstances, institutions may want to consider doing so due
to significant impact of these items on the EFC calculation.
39
Verification Exclusions of Certain
Data Elements Only
 The number in household of a dependent student if the




parents are married and the household size is 3; or the
parent is unmarried and the household size is 2.
The number in the household of an independent student if
the student is married and the household size is equal to 2,
or the student is unmarried and the household size is equal
to 1.
The number in household is excluded if the same amount
was verified in the previous year
Child support received is excluded if the same amount was
verified in the previous award year
Untaxed income is excluded from a federal, state, or local
agency based on a financial needs assessment
40