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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-W-40 !”. Federal Verification Topics.
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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-W-40!”
Federal Verification Topics • Definition and background. • Resolving inconsistencies. • School’s required policies. • Required verification items. • Documentation requirements.
Federal Verification Topics • 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 • 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. • 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 . • Married Parents and HH Size = 3. • Single Parent and HH Size = 2. • Independent student: • 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. • IRS Letter 1722. • RTFTP - computerized tax return summary by IRS Regional Service Centers. • Other IRS tax account summaries. • Verification requirements for tax-filing extensions. • W-2 forms. • IRS approval of request for tax-filing extension. • Copies of federal tax returns when filed.
AGI and Tax Paid • Not reported for non-filers. • Must verify income earned from work. • 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 • 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 Block-Grant 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. • 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: • 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).
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 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 StudiesFour “Not So Easy”Cases • 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.
