HIGHER EDUCATION
Program Integrity Questions and Answers - Verification

Program Integrity Q&A

Archived Guidance
beginning with the 2012-2013 award year

Questions on this topic are divided into the following categories:

UNLESS OTHERWISE NOTED, THE GUIDANCE BELOW APPLIES TO ALL AWARD YEARS BEGINNING WITH 2012-2013.

Introductory Verification Questions (IVQ)

IVQ-Q1. What is the effective date of the new regulations on the verification and updating of student aid application information for applicants who receive subsidized student financial assistance?

IVQ-A1. The new regulations on the verification and updating of student aid application information for applicants who receive subsidized student financial assistance are effective July 1, 2012. Any FAFSA/ISIR selected for verification for the 2012-2013 award year and subsequent award years must be verified according to the new verification regulations. [Program Integrity Issues; Final Rule (Page 66832)] [Guidance issued 03/13/2012]

IVQ-Q2. What are the subsidized and unsubsidized student financial assistance programs?

IVQ-A2. The subsidized student financial assistance programs are Title IV programs for which eligibility is determined on the basis of an applicant’s EFC and include the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant (FSEOG), Federal Work-Study (FWS), Federal Perkins Loan, and subsidized Direct Loan programs. The unsubsidized student financial aid programs are the Title IV programs for which eligibility is not based on the applicant’s EFC and include the TEACH Grant, unsubsidized Direct Loan, and Direct PLUS Loan programs. [Section 668.52] [Guidance issued 03/13/2012]

IVQ-Q3. What is the impact on the Department’s verification selection when corrections are made by a financial aid administrator (FAA) or by a student to the student’s CPS record?

IVQ-A3. If the Department did not select the student for verification on an earlier transaction, subsequent corrections could result in the student being selected for verification since the corrected record will be reassessed in the verification selection process. The exception is if the correction is the result of "professional judgment" by the FAA and if the FAA properly flagged the correction as being made under professional judgment. In that case the student's record will not go through verification selection again.

If the Department selected the student for verification on the earlier transaction, every subsequent transaction for that award year will indicate that the student is selected for verification, even a transaction due to professional judgment. The Verification Tracking Group to which the student had been assigned by CPS will not be changed as a result of subsequent corrections to the student's CPS record. Prior to making professional judgment adjustments, an institution is required to complete verification when the student's FAFSA information has been selected for verification by the Department or the institution. (Section 668.56) [Guidance issued 03/13/2013]

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General Questions (VER)

VER-Q1. Where can I find guidance on the verification requirements?

VER-A1. The following resources provide guidance on the verification requirements:

General

2012-2013 Award Year Archived

2013-2014 Award Year

2014-2015 Award Year

VER-Q2. Does the use of professional judgment by a financial aid administrator (FAA) automatically require an applicant to be selected for verification by the institution, therefore requiring the institution to complete verification prior to making a professional judgment decision?

VER-A2. No. An institution is only required to complete verification prior to making professional judgment adjustments when the applicant’s FAFSA information has been selected for verification by the Department or by the institution. (Section 668.53) [Guidance issued 01/26/2012]

VER-Q3. Are adjustments to an applicant’s FAFSA information that are based on professional judgment selected for verification?

VER-A3. No. Transactions that reflect professional judgment adjustments to an applicant's FAFSA information will not be reevaluated under the verification selection model and therefore, will not be selected for verification as long as the FAA sets the professional judgment flag when the changes are submitted. (Section 668.53) [Guidance issued 01/26/2012]

VER-Q4. May an institution delay disbursing Title IV student financial assistance until the institution completes verification of the FAFSA information it selected beyond the items required by the Department?

VER-A4. It depends on the FAFSA information that has been selected for verification. An institution may delay disbursing Title IV student financial assistance if the FAFSA information that it has required to be verified would impact the applicant’s Title IV student aid eligibility. For example, while not required by the Department, the institution requires verification of an applicant's claim that she is an emancipated minor and thus is independent. Because the result of verification could change the applicant's dependency status and, therefore, her Title IV eligibility, the institution may delay disbursing the federal aid until the question of emancipation has been verified.

However, if the item(s) the institution selects for verification would not impact the applicant's eligibility for Title IV student financial assistance, the institution may not delay disbursing Title IV student financial assistance until verification of those items is completed. For example, the institution requires verification of home equity to determine the applicant's eligibility for state or institutional aid. Because there will be no impact on the applicant's Title IV eligibility regardless of the result of verification, disbursement of Title IV aid may not be delayed while waiting for verification of home equity. (Section 668.58(a)) [Guidance issued 01/26/2012]

VER-Q5. Are Quality Assurance (QA) institutions exempt from the new verification rules beginning with the 2012-2013 award year?

VER-A5. Yes. The changes made to the verification regulations do not alter the way the QA Program operates. In fact, the Department expects that data and results generated from institutions participating in the QA Program will help assess the effectiveness of the new verification regulations. (Section 487A(a)) [Guidance issued 01/26/2012; revised 02/15/2013]

VER-Q6. Must an institution complete verification for selected applicants who will only receive aid under the unsubsidized student financial assistance programs and were not offered aid under the subsidized student financial assistance programs?

VER-A6. No. An institution is not required to complete verification for students who are only receiving aid under the unsubsidized student financial assistance programs and were not offered aid under the subsidized student financial assistance programs. [Section 668.54(b)(1)(iii)] [Guidance issued 03/13/2012]

VER-Q7. Must an institution complete verification for a selected applicant who is eligible for subsidized and unsubsidized student financial assistance but who chooses not to accept the subsidized student financial assistance?

VER-A7. Although generally an institution is not required to complete verification for applicants who only receive unsubsidized student financial assistance, an applicant is not allowed to avoid completing verification by accepting only the unsubsidized student financial assistance. In such a case, the institution must complete verification in order for the applicant to be eligible for any Title IV aid. [Sections 668.51(a), 668.54(b)(1)(ii) and (iii)] [Guidance issued 03/13/2012]

VER-Q8. How should an institution proceed if a selected applicant receives unsubsidized student financial assistance during the first half of the award year, but is later awarded subsidized student financial assistance (i.e., FWS or Perkins Loans) for the second half of the award year?

VER-A8. The institution is not required to complete verification during the first half of the award year because the applicant was only receiving aid under the unsubsidized student financial assistance programs. However, once the institution awarded the applicant subsidized student financial assistance in the second half of the award year, the institution must complete verification for the entire award year according to the new verification regulations. [Sections 668.51(a), 668.54(b)(1)(ii) and (iii)] [Guidance issued 03/13/2012]

VER-Q9. Because graduate students are ineligible for need-based Title IV grants and will no longer be eligible to receive subsidized Direct Loans, are there any conditions under which graduate students’ FAFSA information will need verification?

VER-A9. Since graduate students remain eligible for subsidized Title IV aid in the form of FWS and Perkins Loans, if the institution participates in one or both of those programs it is likely that at least some graduate students will need to be verified. Verification would be required if, under the institution’s awarding policy for FWS and/or Perkins, the graduate student would be awarded aid under those programs. [Sections 668.51(a), 668.54(b)(1)(iii), 34 CFR 674.10(a)(1) and 34 CFR 675.10(a)] [Guidance issued 03/13/2012]

VER-Q10. Is it acceptable under an institution’s FWS and Perkins awarding policy to exclude graduate students from consideration for those programs or to consider graduate students for those programs only after such assistance has been offered to eligible undergraduate students?

VER-A10. No. An institution is not allowed under its packaging policies to exclude eligible graduate students from consideration for assistance under the FWS or Perkins Loan programs or to consider eligible graduate students for assistance under those programs only after such assistance has been offered to eligible undergraduate students. The regulations provide that assistance under the FWS and Perkins Loan programs must be made reasonably available to all eligible students, including graduate students. [Sections 34 CFR 674.10(a)(1) and 34 CFR 675.10(a)] [Guidance issued 03/13/2012]

VER-Q11. May an institution disburse unsubsidized student financial assistance, i.e., Direct Unsubsidized Loans and PLUS Loans, prior to completing verification for a selected applicant who is eligible for both subsidized and unsubsidized student financial assistance?

VER-A11. Yes. However, when determining the amount of the unsubsidized student financial assistance, the institution must ensure that the subsidized assistance the applicant is estimated to receive before completing verification is taken into consideration to avoid exceeding the applicant’s financial need. And, after verification of the subsidized assistance is completed, the school must ensure that both the subsidized assistance and the unsubsidized assistance are adjusted if necessary. [Sections 668.51(a), 668.54(b)(1)(ii) and (iii)] [Guidance issued 10/10/2012]

VER-Q12. Can an institution determine which of its staff are authorized to review the identity of an applicant selected for verification groups V4 or V5?

VER-A12. Yes, each institution may determine which of its staff are authorized to review an applicant’s identity. The Department does not designate which office or level of staff is responsible for this function. Since the administration of the Title IV programs is an institution-wide responsibility, an institution has much latitude in determining which of its staff are authorized to review an applicant's identity. However, as a best practice, we recommend that staff selected to perform this function be permanent employees of the institution. We also suggest that the institution maintain a written record of who is authorized to carry out this function. [Section 668.53] [Guidance issued 03/13/2013]

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Applicants Selected for Verification by the Department (DS)

DS-Q1. May an institution require an applicant who was selected for verification by the Department to verify other FAFSA information in addition to those items identified by the Department for the award year?

DS-A1. Yes. An institution may require an applicant to verify any FAFSA information that it specifies, and the institution may decide what documentation is acceptable for its institutionally chosen items. For example, an institution may choose to verify (for some or for all of its applicants) "income earned from work," and the institution may determine that copies of IRS W-2 forms will be the required documentation. (Section 668.54(a)) [Guidance issued 01/26/2012]

DS-Q2. When an applicant is not selected for verification by the Department on the applicant’s initial transaction, is it possible for that applicant to be selected for verification by the Department on a subsequent transaction?

DS-A2. Yes. Whenever a change to FAFSA information is submitted to the Department, the applicant’s FAFSA record is reevaluated under the verification selection model. While the change will not, in itself, result in the applicant being selected, in some instances the review of the entire record could result in the applicant being selected for verification. (Section 668.54) [Guidance issued 01/26/2012]

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Applicants Selected for Verification by the Institution (IS)

IS-Q1. May an institution select applicants for verification other than those selected by the Department?

IS-A1. Yes. An institution may require applicants other than those selected by the Department to verify FAFSA information. (Section 668.54(a)(3)) [Guidance issued 01/26/2012]

IS-Q2. Must an institution require an applicant it selects for verification to verify all of the FAFSA information identified by the Department for the award year? Must the institution comply with the "acceptable documentation" requirements for the FAFSA information it selects for verification?

IS-A2. For the applicants it selects for verification, an institution is not required to verify any or all of the FAFSA information identified by the Secretary for the award year and it may require verification of other FAFSA information. The institution may also determine what documentation to accept for the applicants it selects for verification, for any of the FAFSA information it has determined must be verified. (Section 668.54(a)(3)) [Guidance issued 01/26/2012]

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Verification Items (VI)

VI-Q1. Are tax filers who filed or will file a tax return required to verify income earned from work?

VI-A1. No. Tax filers who filed or will file a tax return are not required to verify income earned from work. (Section 668.56) [Guidance issued 01/26/2012]

VI-Q2. Are institutions required to verify the receipt of - Supplemental Nutrition Assistance Program (SNAP) – Food Stamps - benefits that was reported on a verification worksheet or other documentation at the institution, but not reported on the applicant's FAFSA?

VI-A2. There are special verification considerations for the “means tested benefits programs,” including SNAP, that are on the FAFSA. This is because receipt of any of those benefit programs only impacts the applicant’s eligibility for Title IV aid if receipt of the benefit makes the applicant eligible for either of the alternate expected family contribution (EFC) calculations: Automatic Zero EFC (Auto Zero EFC) or Simplified Needs Test (SNT). Because not all applicants are eligible to be considered for these alternate EFC calculations (e.g., income to high) and because some applicants are eligible based on other factors (e.g., type of tax return filed), many applicants are not presented with the means tested benefits programs question.

Therefore, some applicants for whom the question was not presented, may have actually received (or someone in their family received) SNAP benefits. Depending on how the institution has chosen to communicate its verification requirement, these applicants might provide the institution with information about the receipt of SNAP on a verification worksheet (or other format) even when the question was not presented to applicants completing FAFSA on the Web.

In instances where the applicant’s ISIR does not indicate the receipt of SNAP but the applicant was, nonetheless, determined to be eligible for either of the alternate EFC calculations, the receipt of SNAP benefits was not needed to determine eligibility for Auto Zero EFC or for SNT. When this is the case, there is no need for the institution to change the FAFSA SNAP field using FAA Access. Similarly, if the applicable income precludes the applicant from being considered for either of the alternate EFC calculations, there is no need for the institution to change the FAFSA SNAP field.

However, in instances where it appears that the applicant, who was not determined to be eligible for one of the alternate EFC calculations, would become eligible if the response to the SNAP question was “Yes,” the institution must change the FAFSA SNAP field so that the applicant can appropriately benefit from the special EFC calculation. For example, an applicant completing FAFSA on the Web reports an AGI of $52,000. Because the AGI exceeds the income threshold to qualify for either of the alternate EFC calculations, the applicant is not presented with any of the alternative EFC calculation questions. Therefore, the applicant's ISIR will not indicate that the applicant or a household member met any of the eligibility criteria for Auto Zero or SNT. However during verification, the applicant correctly reports to the institution a change in her AGI from $52,000 to $22,000 and indicates receipt of SNAP benefits. In this case, the institution would be required to change the FAFSA SNAP field when correcting the applicant’s AGI.

To eliminate burden on institutions with a requirement that they determine whether they must change the FAFSA SNAP field so that a determination can be made as to whether the applicant would or would not be eligible for one of the alternative EFC calculations, it is permissible for an institution to change the FAFSA SNAP field in all instances and let the Department’s systems determine eligibility. [Guidance issued 01/26/2012; revised 04/04/2014]

VI-Q3. Must an institution require an applicant selected for verification to verify receipt of SNAP benefits (food stamps) if the applicant or someone in the applicant's household, or if applicable, the applicant's parent's household, also reported receipt of one of the other means-tested federal benefits that would make the applicant eligible for one of the alternate EFC calculations?

VI-A3. Yes. If the receipt of SNAP benefits was included on the applicant’s ISIR, the institution must require an applicant selected for verification to verify the receipt of SNAP benefits.

The institution may document the receipt of SNAP benefits by obtaining a statement signed by the applicant or parent, as appropriate, affirming that SNAP benefits were received by someone in the household during the appropriate calendar year for the award year. The Department's suggested verification text provides such a statement. Alternatively, the institution may require documentation from the agency that issued the SNAP benefits. (Sections 668.56 and 668.57(d)) [Guidance issued 03/13/2012; revised 04/04/2014]

VI-Q4. How are distributions from an Individual Retirement Account (IRA) handled by the FAFSA-IRS Data Retrieval Tool, and how should a school address any portion of such a distribution that is "rolled over" into another qualified IRA? How are distributions from pensions and other annuities treated?

VI-A4. IRS requirements, as discussed in IRS Publication 75 and IRS Publication 575, provide that most distributions from IRAs (as well as from most pensions and annuities) are treated as taxable income. However, those publications discuss allowing some or all of these distributions to be excluded from taxable income under certain conditions. If none of the exclusionary conditions apply, the tax filer is instructed to report the full amount of the distribution on IRS Form 1040 line 15b for an IRA distribution and line 16b for pensions and annuities. If, however, the tax filer is eligible to exclude some or all of the distributions, the IRS instructs the tax filer to enter the full amount of the distribution on IRS Form 1040 line 15a or 16a, as appropriate. The tax filer is then instructed to subtract from the amount in 15a or 16a any portion of the distribution that, under IRS rules, is exempt from being considered as taxable income. The difference is then reported on lines 15b or 16b, as appropriate, and becomes part of the taxable income and thus, part of the tax filer’s adjusted gross income (AGI). If there are qualified rollovers, the IRS guidance tells the tax filer to enter the word “Rollover” on the tax return next to line 15b or 16b. Note that the corresponding IRA line items for an IRS Form 1040A are 11a and 11b for IRAs, and 12a and 12b for pensions and annuities.

The summary above is not provided as official IRS guidance. Tax filers should consult the IRS or their tax advisors for definitive guidance on the rules governing the treatment of IRAs and pensions and annuities for tax purposes.

FAFSA Requirements: Generally, amounts of any distributions that were excluded from taxable income under the IRS rules—the difference between line 15a and line 15b or between line 16a and 16b—are considered untaxed income for the purpose of calculating an applicant’s expected family contribution (EFC), and therefore, should be reported on the FAFSA as responses to the IRA and pension questions. However, the calculation of an EFC allows for the exclusion of any amount of the distribution that is a rollover. Thus the FAFSA instructions tell the applicant to exclude rollover amounts when answering the above FAFSA questions. This guidance is also provided in Chapter 2 of the Department’s Application and Verification Guide that is part of the Federal Student Aid Handbook.

IRS Data Retrieval Tool: Of course, the FAFSA-IRS Data Retrieval Tool cannot know if the word "Rollover" was included on the tax return. Therefore, it assumes that the total difference between the distribution reported on line 15a or 16a, and the taxable portion on line 15b or 16b is untaxed income for EFC purposes, and that amount will be transferred from the FAFSA-IRS Data Retrieval Tool into the FAFSA as untaxed income for IRA distributions or pension distributions.

The FAFSA applicant, the applicant's parent, or the institution may modify the amount that the FAFSA-IRS Data Retrieval Tool transferred into the FAFSA, if all or a portion of that amount should not be included as untaxed income because of a rollover. To support such a change, the institution must maintain documentation (see below) that the amount not included in the FAFSA was an amount that was the result of a rollover.

Verification Requirements: Since neither the information from the FAFSA-IRS Data Retrieval Tool nor an IRS Tax Return Transcript will include the tax filer’s "Rollover" notation, to verify the amounts that should be included on the FAFSA, the institution must obtain a written statement from the tax filer indicating the amount of the distribution that was excluded because it was an authorized IRS rollover. Acceptable documentation could be a signed statement from the tax filer. Acceptable documentation could also be a notation by the tax filer on the IRS Tax Return Transcript that includes the word "Rollover" beside the applicable item(s) on the transcript, similar to the instructions provided for the IRS Form 1040 or 1040A. If the institution accepts as documentation of the rollover a notation on the IRS Tax Return Transcript, it must ensure that the notation is signed and dated by the tax filer. [Guidance issued 05/04/2012; revised 04/04/2014]

VI-Q5/A5. Archived

VI-Q6. Are institutions required to verify the payment of Child Support that was reported on a verification worksheet or other documentation at the institution, but not reported on the applicant's FAFSA?

VI-A6. An institution must resolve conflicts between an applicant’s FAFSA information and other information at the institution, including information that was reported on a verification worksheet. For this question, the conflict is that when completing the FAFSA the applicant did not indicate payment of child support by the applicant, the applicant’s spouse, and/or the applicant’s parent. Yet, on a verification worksheet, or other documentation received by the institution, payment of child support was reported. Resolving this conflict is important because if it is determined that child support was paid, the applicant’s EFC will likely be reduced. Note, however, that if the applicant was eligible for Automatic Zero EFC (Auto Zero EFC), the Child Support Paid question would not have been presented. In this case, so long as the applicant is still Auto Zero EFC eligible, there would be no need to correct the Child Support Paid field. (Section 668.16(f)) [Guidance issued 10/10/2012]

VI-Q7. Must an institution complete verification of all FAFSA information identified in Verification Tracking Groups V1 or V5 even if the selected applicant is eligible for either of the alternate expected family contribution (EFC) calculations: Automatic Zero EFC (Auto Zero EFC) or Simplified Needs Test (SNT)?

VI-A7. Generally, yes for SNT-eligible applicants and no for Auto Zero EFC-eligible applicants.

The only difference in the EFC calculation for SNT-eligible applicants is the elimination of assets, and assets are not required to be verified. Therefore, SNT-eligible applicants who are assigned to Verification Tracking Groups V1 or V5 are required to verify all FAFSA information listed for the Verification Tracking Group they are placed in.

For Auto Zero EFC-eligible applicants placed in Verification Tracking Groups V1 or V5, the information that must be verified varies slightly between those applicants who are dependent and those who are independent.

For dependent applicants, only the following FAFSA/ISIR information must be verified:

  • The parents' AGI if they were tax filers;
  • The parents’ income earned from work if they were nontax filers; and
  • The receipt of SNAP benefits (food stamps) by any household member if the receipt of these benefits qualified the applicant for Auto Zero EFC.

For independent applicants, only the following FAFSA/ISIR information must be verified:

  • The applicant's and spouse's AGI if tax filers;
  • The applicant's and spouse's income earned from work if they were nontax filers;
  • The number of household members to determine if the independent applicant has one or more dependents other than a spouse; and
  • The receipt of SNAP benefits (food stamps) by any household member if the receipt of these benefits qualified the applicant for Auto Zero EFC.

In addition to the FAFSA/ISIR information listed above, dependent and independent applicants placed in Verification Tracking Group V5 must also verify their high school completion status and identity/statement of educational purpose. [Section 668.56] [Guidance issued 03/13/2013; revised 7/11/2013 and applies only to the 2013-2014 award year]

VI-Q8/A8. Archived

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Updating Applicant’s FAFSA Information (UPD)

UPD-Q1. When an FAA updates an applicant’s marital status "to address an inequity or to reflect more accurately the applicant's ability to pay" under §668.55(c), what other information must also be updated?

UPD-A1. Usually when the applicant’s marital status changes, there is no updating of the applicant’s dependency status or, for applicants selected for verification, household size or number in college. However, under §668.55(c), an FAA may update the applicant's FAFSA information due to a change in the applicant’s marital status if the FAA determines it is necessary to address an inequity or to reflect more accurately the applicant’s ability to pay.

If an FAA chooses to exercise the authority allowed under §668.55(c), all relevant FAFSA information must be updated to be consistent with the new marital status, including the spouse’s financial information, for applicants whose dependency status changes, or for applicants who are selected for verification. The FAA updates these applicants’ marital status on a case-by-case basis and must document the reason for the decision.

Likewise, for an applicant who was independent only because he or she was married when the FAFSA was first completed, if the FAA changes the applicant’s marital status to unmarried, making the applicant dependent, the FAFSA must be updated with parental information. [Section 668.55(c)] [Guidance issued 01/26/2012; revised 03/13/2012]

UPD-Q2. What happens when a change to an applicant's marital status is made?

UPD-A2. When an applicant's marital status is updated, the Department’s Central Processing System (CPS) will reject the resulting transaction. The FAA may use FAA Access to CPS Online to enter an FAA-only reject override that will result in a new transaction with the updated dependency status. [ISIR Guide] [Guidance issued 03/13/2012; revised 04/04/2014]

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Acceptable Documentation for FAFSA Information Selected for Verification (DOC)

DOC-Q1. How can the IRS Data Retrieval Process be used to satisfy the verification requirement if the tax filer has not filed an income tax return at the time of completing the FAFSA?

DOC-A1. If the tax filer has not filed an income tax return at the time the FAFSA was initially completed, estimated income tax information may be used. Once the tax filer has filed the income tax return, the IRS data may be retrieved and transferred using the IRS Data Retrieval Process available through the corrections process of FAFSA on the Web. (Section 668.57(a)) [Guidance issued 01/26/2012]

DOC-Q2. What documentation must be collected from an applicant who was selected for verification if the applicant or the applicant’s parent(s) filed an amended tax return with the IRS?

DOC-A2. The Department's objective is to ensure that Title IV aid eligibility determinations are made based on the most accurate information possible. However, the FAFSA on the Web IRS Data Retrieval Tool (DRT) will only transfer certain, but not all, tax information from an original tax return and none of the tax information from an amended tax return. Similarly, the IRS Tax Return Transcript only includes information from the original tax return. While the IRS Tax Account Transcript does include tax return items that were changed when an amended return was filed, it does not specify which line items correspond with the line items from an IRS Tax Return Transcript, making it difficult for institutions to identify the tax information that was changed.

Therefore, when an institution is aware that an amended tax return was filed, the institution will need to use information from both documents selected below to complete and satisfy the verification requirements–

  • a signed copy of the original tax return that was filed with the IRS, an IRS Tax Return Transcript (which does not have to be signed), or the documentation specified under DOC-Q10/DOC-A10, and
  • a signed copy of the IRS Form 1040X that was filed with the IRS.

Individuals who originally utilized the IRS DRT to complete their FAFSA may not rely on that tax information to complete and satisfy the verification requirements if an amended tax return was filed. In this case, the documentation listed earlier must also be obtained in order to complete and satisfy the verification requirements.

This guidance supersedes our prior guidance on what is acceptable documentation when an amended tax return is filed with the IRS in DCL GEN-11-13, DCL GEN-12-11, Sample 2012-2013 Verification Worksheet EA, and our recent EA dated August 21, 2012 on the Limited Circumstances When a Signed Copy of a Tax Return or Other Documentation is Acceptable for Completing Verification. (Sections 668.57(a)) [Guidance issued 01/26/2012; revised 10/10/2012]

DOC-Q3. May an applicant have an IRS Tax Return Transcript sent directly to a college or university?

DOC-A3. It is the Department’s understanding that IRS Tax Return Transcripts requested online or by telephone will only be sent by the IRS to the address of the tax filer and cannot be sent directly to a third-party by the IRS. However, on line 5 of the paper IRS Form 4506T-EZ tax filers may request that the IRS mail their IRS Tax Return Transcript directly to a third-party. Institutions are responsible for notifying aid applicants to list the institution as the third-party to receive the transcript. (Section 668.57(a)) [Guidance issued 01/26/2012; revised 04/04/2014]

DOC-Q4. May an institution decide what documentation is acceptable for its institutionally selected applicants?

DOC-A4. Yes. The institution may decide what documentation is acceptable for its institutionally-selected applicants both for institutionally-selected information and for FAFSA information that has been identified for verification by the Department for the award year. Keep in mind that while the institution may identify acceptable documentation for institutionally-selected applicants, the institution must use the documentation identified in the Federal Register notice for applicants selected by the Department. (Sections 668.53(b)(1) and 668.54(a)) [Guidance issued 01/26/2012]

DOC-Q5. Is the information provided on a verification worksheet or other documentation at the institution sufficient to verify household size, number in college, receipt of Supplemental Nutrition Assistance Program (SNAP) benefits, child support paid, or income earned from work for nontax filers; since the applicant signs the verification worksheet or other documentation submitted to the institution acknowledging that the information is correct?

DOC-A5. A verification worksheet or other documentation at the institution may serve as the signed statement to verify household size, number in college, receipt of SNAP benefits, child support paid, or income earned from work for nontax filers, as long as the worksheet or other documentation has a certification statement similar to what is included on the Department's suggested verification text. An institution is not required to use the suggested verification text developed by the Department. It may use its own worksheet or require other documentation. [Guidance issued 01/26/2012; revised 04/04/2014]

DOC-Q6. What documentation must be collected from an applicant who was selected for verification and whose Institutional Student Information Record (ISIR) shows receipt of Food Stamps – Supplemental Nutrition Assistance Program (SNAP)?

DOC-A6. An institution may accept as documentation, to verify the FAFSA reported receipt of SNAP benefits included on the ISIR, a signed statement by one of the parents of a dependent applicant or by an independent applicant that certifies that either they or another person who was included in the FAFSA household size received SNAP benefits during the appropriate calendar year for the award year. The Department's suggested verification text provides such a statement. Alternatively, the institution may require documentation from the agency that issued the SNAP benefits. (Section 668.57(d)) [Guidance issued 01/26/2012; revised 04/04/2014]

DOC-Q7. For verification of nontax filer wages, are institutions required to collect both the W-2(s) from all employers and the signed statement certifying that the individual has not filed and is not required to file an income tax return, listing all income and sources?

DOC-A7. Yes. For nontax filers, an institution is required to collect a signed statement certifying that the person is not required to file an income tax return and including the sources and amounts of any income earned from work. In addition, copies of an IRS W-2 form for each source of income earned from work must also be collected. The Department’s suggested verification text will assist an institution in accomplishing this. Institutions that do not use the Department’s suggested verification text must collect the documentation necessary to account for all sources of income. [Section 668.57(a)(4)(i)] [Guidance issued 03/13/2012; revised 04/04/2014]

DOC-Q8. For verifying child support paid, please clarify whether the institution is required to obtain the signature of the person who paid the child support?

DOC-A8. To minimize burden on families and institutions that would result by requiring the signature of the person who paid the child support, the signature of the applicant and, for a dependent student, one of the applicant’s parents, on the Department's sample verification worksheets (or on a similar form developed by the institution) will meet the verification requirement for child support paid. This is because by providing those signatures the applicant, or parent, is certifying that the information provided is complete and accurate. This policy is consistent with our position to only require the applicant's signature and not the applicant's spouse and only one parent's signature for a dependent student when completing the Free Application for Federal Student Aid (FAFSA). [Section 668.57(d)] [Guidance issued 03/13/2012]

DOC-Q9. May an institution accept or make a copy of an IRS transcript that was originally obtained from the IRS?

DOC-A9. Yes, an institution may accept or make a copy of an IRS transcript that was originally obtained from the IRS. [Section 668.57(a)(1)(i)] [Guidance issued 03/13/2012]

DOC-Q10. May an institution use a Record of Account Transcript, a Return Transcript for Taxpayer (RTFTP), or an Information Returns Processing Transcript Request - Wages (IRPTR-W) provided by the IRS to meet the verification requirements?

DOC-A10. An institution may accept as verification documentation any IRS tax transcript that includes all of the income and tax information required to be verified: adjusted gross income (AGI), U.S. income tax paid, Untaxed IRA Distributions, Untaxed Pensions, Education Credits, IRA Deductions and Tax Exempt Interest. Therefore, because the Record of Account Transcript and the Return Transcript for Taxpayer (RTFTP) includes all of the above noted information, either document may be used to meet the verification requirements. However, because the Information Returns Processing Transcript Request - Wages (IRPTR-W) only provides wage information it does not satisfy the verification requirements. [Section 668.57(a)(1)(i)] [Guidance issued 05/04/2012; revised 10/10/2012]

DOC-Q11/A11. Archived

DOC-Q12. May an institution meet the signature requirements for verification documentation submitted by an applicant, parent or spouse through an electronic process?

DOC-A12. For verification documentation purposes, an institution may collect an electronic signature for an applicant, parent or spouse if the process for obtaining the electronic signature includes assurances that the person providing the electronic signature is the person whose signature is being collected. Often, this is accomplished through a PIN or password process where the PIN or password has been assigned only after authentication of the identity of the person to whom the PIN or password is assigned. [Guidance issued 06/21/2012]

DOC-Q13. Is there an instance when an IRS Request Flag code of "02" would not carry forward to a subsequent transaction?

DOC-A13. Yes, when the student, parent, or FAA corrects a transaction on which the IRS Request Flag is not set to '02' or a change is made to any of the associated IRS information. An example would be where the student when completing the FAFSA used the IRS Data Retrieval Tool to transfer IRS information to the FAFSA but the parent did not. The resultant ISIR transaction '01' would have an IRS Request Flag code of '02' for the student and '05' for the parent. If the family then used the '01' transaction to transfer the parent’s IRS information using the IRS Data Retrieval Tool, the resultant ISIR transaction '02' would have an IRS Request Flag code of '02' for both the student and the parent. If the family or FAA used the '01' transaction instead of the '02' transaction when submitting a correction that did not change any of the IRS information, the resultant ISIR transaction '03' would again have an IRS Request Flag code of '02' for the student and '05' for the parent because those were the values in the '01' transaction that was used to make the last correction. Likewise, if the FAA used the '02' transaction to submit a correction to the parent’s IRS information, the resultant transaction would have an IRS Request Flag code of '02' for the student but not for the parent because of the change to the parent's IRS information. The IRS Request Flag codes can be found in the ISIR Guide. [Guidance issued 06/21/2012; revised 04/04/2014]

DOC-Q14. What tax information should an institution use when both the IRS Data Retrieval Tool is used and an IRS Tax Return Transcript is obtained?

DOC-A14. We have informed institutions that tax information obtained through the IRS Data Retrieval Tool (DRT) may be considered verified if that information was not subsequently changed after it was transferred from the IRS to the FAFSA. However, an IRS Tax Return Transcript may provide a “per computer” amount for certain tax information that is different than the amount the tax filer originally reported to the IRS. The "per computer" is an amount that has been modified by the IRS to correct mathematical errors and therefore is more accurate than the amount for the same tax information that was transferred through the IRS DRT. The IRS Tax Return Transcript may also include other tax information that may be different from what was initially reported on the FAFSA but was not part of the tax information transferred through the IRS DRT. Institutions are not required to obtain an IRS Tax Return Transcript to complete verification for individuals who successfully utilized the IRS DRT. If an institution obtains a copy of a tax filer's IRS Tax Return Transcript, any amount(s), including the “per computer” amount(s), on the transcript that is different from the amount reported on the FAFSA by $25 or more must be corrected on the FAFSA through CPS. However if an institution is required to submit any change through CPS as a result of verification it must submit all changes, including amounts that are below the $25 tolerance. (Sections 668.16(f), 668.57(a), and 668.59(a)(2)) [Guidance issued 09/13/2012]

DOC-Q15. What documentation is required for an applicant, parent or spouse who is the victim of identity theft and, as a result, is unable to use the IRS Data Retrieval Tool or to obtain an IRS Tax Return Transcript until the matter has been resolved by the IRS?

DOC-A15. When the IRS determines that a tax filer has been, or likely was, a victim of identity theft, it will not allow that tax filer to obtain tax information through the use of the IRS DRT or to receive an IRS Tax Return Transcript until the matter has been resolved by the IRS. Resolution could take up to a year, depending on the complexity of the case. Therefore, in instances when the tax filer has been the victim of identity theft, the institution may accept for verification purposes a signed copy of the paper IRS income tax return that was filed with the IRS along with additional documentation as follows.

If the tax filer had submitted to the IRS an IRS Form 14039 "Identity Theft Affidavit," a copy of that signed form must be submitted to the institution with the signed copy of the paper tax return.

In some instances, the IRS does not require the tax filer to submit an IRS Form 14039 or the tax filer may not have saved a copy of the IRS Form 14039 that was submitted to the IRS. In these instances, the tax filer must submit, in addition to the signed copy of the tax return, either:

  • a statement signed and dated by the tax filer indicating that he or she was a victim of IRS identity theft and that the IRS is investigating the matter. The statement must also indicate that the tax filer submitted a Form 14039 to the IRS, but did not keep a copy of it or that he or she was not required to file the form; or
  • a copy of a police report that may have been filed by the tax filer related to the IRS identify theft. [Section 668.57(d)] [Guidance issued in an Electronic Announcement dated August 21, 2012; revised guidance issued on page 3 in APPENDIX A of the Electronic Announcement dated January 18, 2013 and applies to 2013-2014 and previous award years. Guidance for 2014-2015 and subsequent award years is provided in Dear Colleague Letter GEN-14-05]

DOC-Q16. Does an institution have the authority to require an individual who has been granted a tax filing extension by the IRS to use the IRS Data Retrieval Tool (IRS DRT) or obtain an IRS Tax Return Transcript before proceeding with verification?

DOC-A16. No, an institution may not delay completing verification for an applicant when a tax filing extension has been granted by the IRS. The income and tax verification requirements are met if the taxpayer provides the institution with a copy of IRS Form 4868 and a copy of IRS Form W–2 for each source of employment income received for the tax year; or if self-employed, a signed statement certifying the amount of the AGI and the U.S. income tax paid for the tax year. This is to provide extension filers with a timely alternative to complete the verification process and to avoid delaying the applicant’s receipt of aid because of the extended period of time that may elapse before the tax return is filed with the IRS.

An institution may request that an individual granted a filing extension submit tax return information using the IRS Data Retrieval Tool or by obtaining an IRS Tax Return Transcript that lists tax account information for the tax year after the income tax return has been filed. If an institution receives such information, it must verify the income information of the tax filer(s). [Section 668.57] [Guidance issued 04/25/2013]

DOC-Q17. Can an institution rely on documentation of a student’s high school completion status or documentation that a student has the equivalency of a high school diploma that it collected for purposes other than completing verification to verify a student’s high school completion status?

DOC-A17. Yes, if the documentation the institution collected (e.g., a copy of the high school diploma, GED, homeschool credential, or documentation that indicates the student successfully completed a program of at least two years that is acceptable for full credit toward a bachelor's degree) complies with the Title IV verification requirements as provided in the annual Federal Register notice.

Some institutions collect 7th semester high school transcripts prior to the student having been awarded the actual diploma. Also, some institutions collect high school transcripts for some but not all of their students because they may have special programs that admit students who do not have a high school diploma. In both of these instances, the institution must collect separate documentation that show the date when the diploma was awarded. [Section 668.57] [Guidance issued 04/25/2013; revised 04/04/2014]

DOC-Q18. Must an institution complete verification for students placed in verification groups V4 or V5 who will only receive aid under the unsubsidized student financial assistance programs and not from the subsidized student financial assistance programs?

DOC-A18. Verification is not required for a student receiving only unsubsidized student financial assistance. However, for students selected for Verification Tracking Groups V4 or V5, we strongly recommend that an institution collect the documentation necessary to verify the student’s high school completion status and identity/statement of educational purpose. This will help ensure that only eligible students receive aid and improve the integrity of the Title IV, HEA programs. [Sections 668.54 and 668.57] [Guidance issued 04/25/2013; revised 04/04/2014 and applies beginning with the 2013-2014 award year]

DOC-Q19. Are high school diplomas from other countries acceptable documentation to verify a student’s high school completion status?

DOC-A19. A high school diploma from a country other than the United States is acceptable as documentation to verify a student’s high school completion status if the diploma is equivalent to a U.S. high school diploma. An institution with the expertise may determine whether a foreign secondary school diploma or certificate is equivalent to a U.S. high school diploma, or it may use a diploma evaluation service. [Section 668.57 and Volume 1 of the Federal Student Aid Handbook] [Guidance issued 04/25/2013]

DOC-Q20. What are schools supposed to collect when a student established Title IV eligibility under one of the ability-to-benefit (ATB) alternatives but is selected under verification groups V4 or V5 to verify a student’s high school completion status?

DOC-A20. In such cases, the school should have already obtained or be in the process of obtaining documentation necessary to support the student’s eligibility under one of the ATB alternatives (passed appropriate ATB test or successfully completed the requisite number of hours). Therefore, no further high school completion documentation should be needed from the student. [Sections 668.57 and Dear Colleague Letter GEN-12-09] [Guidance issued 04/25/2013]

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Changing Applicant's FAFSA Information (CHD)

CHD-Q1. Is an institution required to submit changes to a FAFSA dollar item that is less than $25 if the institution has to submit a change to a nondollar item? What if the other item is a dollar item where the change is $25 or more?

CHD-A1. Yes. If an institution is required to submit any change as a result of verification it must submit all changes. For example, if there is a change in number of family members and also a change in the Education Credit amount of only $15, the institution must submit both changes to the CPS even though the difference in the amount of the Education Credit is less than the $25 tolerance. Likewise, if, for example, the difference for AGI is $100, and the difference for taxes paid is $20, the institution must submit both the AGI and the taxes paid changes, not just the AGI change that exceeded the $25 tolerance. [Section 668.59] [Guidance issued 06/21/2012]

CHD-Q2. Since IRA rollovers are not reflected on the IRS Tax Return Transcript or transferred into an online FAFSA using the IRS Data Retrieval Process, is changing the FAFSA to reflect the rollover exclusion a “correction,” an “update” or “professional judgment?"

CHD-A2. Such a change is a correction and not updating or a use of professional judgment. [Guidance issued 10/10/2012]

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Program Integrity Q&A | Verification-Archived Guidance


 
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Last Modified: 04/10/2014