Verification 1

Verification - Definitions  Subsidized student financial assistance programs Verification applies to Title IV programs where eligibility based upon Expected Family Contribution Pell, FSEOG, FWS, Perkins, Direct Subsidized Loan 2

Verification - Definitions  Unsubsidized student financial assistance programs Verification does not apply to Title IV programs where eligibility not based Upon Expected Family Contribution  TEACH Grant, Direct Unsubsidized Loan, Direct PLUS Loan, Iraq and Afghanistan Service Grant 3

Verification – Changes To FAFSA Information  For subsidized programs, all changes resulting from verification must be submitted to CPS if change is To any non-dollar item or A single dollar item of $25 or more  If required to submit one change, must submit all changes 4

Verification & Professional Judgment All applicants selected for verification (either by ED or school) must complete verification before any PJ adjustments to FAFSA School’s written verification policies and procedures must include statement that no adjustments can be made until verification is completed 5

Verification & Professional Judgment  If applicant NOT selected for verification:  Verification NOT required  May perform PJ as usual 6

Verification Selection Institutions must verify all applicants selected by CPS for verification -Removes institution’s option to verify only 30% of applicant pool 7

Verification - Exclusions No verification required if –  Applicant is eligible to receive only unsubsidized aid  Applicant received no aid for reasons other than failure to complete verification  Transfer student already completed verification for the award year at a prior school Current school must collect statement from prior school, providing transaction number of applicable ISIR Current school must pay on verified transaction  Death of applicant 8

Verification - Exclusions  Not required to verify FAFSA information for parents of dependent student or spouse of independent student if parents/spouse Reside outside U.S. and cannot be contacted by normal means of communication Cannot be located because contact information is unknown and cannot be obtained Mentally incapacitated Deceased (spouse) 9

Verification – Marital Status Updating Marital Status: -MAY require student to update FAFSA if change in marital status necessary to address an inequity or reflect more accurately ability to pay FAFSA needs to reflect accurate household size, number in college, dependency status and family financial information 10

Acceptable Documentation  School may require an individual granted a tax filing extension to provide a copy of their completed and signed tax return when filed If school receives a copy of the return, it MUST verify AGI and taxes paid  Tax returns submitted with preparer signature (wet, stamped, typed or printed) with the name and address of the preparer must also have their SSN, EIN, or PTIN 11

Verification & Interim Disbursements Interim disbursements may be made without receipt of corrected ISIR if completed verification does not change aid eligibility However all required corrections must be submitted to CPS and school must receive revised ISIR transaction 12

Verification & Increasing Pell Eligibility No longer limits student to lesser Pell award if verification completed after enrollment -Student would receive Pell payment based upon correct EFC Must have valid ISIR to support disbursements 13

Information to be Verified Beginning with , ED will publish a Federal Register Notice prior to beginning of each award year’s FAFSA processing listing possible verifiable items and acceptable documentation SAR/ISIR will specify required verification items for applicant 14

Verification Dear Colleague Letter  DCL GEN Federal Register published July 13, 2011 details FAFSA information to be verified for AY Summarizes the verification process for the award year Citations: 34 CFR §§ through

Verification Items All Applicants Number in Household Not required if:  Dependent student household size reported is two and the parent is unmarried or three if the parent is married  Independent student household reported is one and the applicant is unmarried or two if the applicant is married 16

Verification Items All Applicants - Number in College  Not required if reported is one  Provide name and age of each household member who is or will be attending an eligible postsecondary educational institution as at least a half-time student in the award year and the name of the eligible institution(s) that each household member is or will be attending 17

Verification Items All Applicants Food Stamps, if receipt reported on FAFSA  Documentation from the agency that issues Food Stamps benefit or alternative documentation as determined by the institution to be sufficient to confirm that the applicant received Food Stamps in 2010 or

Verification Items All Applicants – Child support paid if amount reported on FAFSA  Statement signed by the applicant, spouse, or parent who paid the child support certifying: Amount of child support paid Name of the person to whom child support was paid The name of the children for whom child support was paid 19

Verification Items Tax Filers- From IRS Data Retrieval  Adjusted Gross Income (AGI)  Taxes paid  Specific untaxed income items from tax return - Untaxed IRA distributions Untaxed pensions Education credits IRA deductions Tax exempt interest 20

Verification Items Nontax Filers  Copy of IRS Form W-2 for each source of employment income received for tax year 2011  A signed statement certifying: That the individual has not filed and is not required to file an income tax return for tax year 2011 The sources of income earned from work as reported on the FAFSA and amounts of income from each source for tax year 2011 that is not on W-2s 21

Documentation  Comprehensive list in July 13, 2011 Federal Register notice IRS Data Retrieval Process IRS Transcript Request On-Line at IRS website: IRS Toll free number: (800) Obtain form 4506T-EZ online and mail to IRS: IRS Tax Return: Limited conditions 22

IRS Data and Verification For  An institution may consider IRS retrieved information as acceptable verification documentation if The Secretary has identified those items as having come from the IRS and have not been changed  IRS Request Flag = 02 23

IRS Data Retrieval  CPS will set flags and comment codes to indicate that the student and/or parent transferred IRS data into FOTW  Comment codes will appear in: FAA Information section of the ISIR Student Inquiry section of FAA Access  Flags and codes set based on certain conditions 24

IRS Request Flag Values IRS Request Flag on ISIR will begin to be populated 25

IRS Data Retrieval Tool FAFSA on the Web will include logic to make the determination for the applicant. 26

IRS Tax Return Transcript Required A tax transcript is required when: –the IRS Data Retrieval Process was not used –the IRS Data Retrieval Process was used, but data was subsequently changed –a married independent applicant and spouse filed separate tax returns. –the parents of a dependent student filed separate tax returns. 27

IRS Tax Return Transcript Required A tax transcript is also required when: –an applicant or applicant’s parent had a change in marital status after the end of the tax year on December 31, –the applicant, or parent or spouse, as applicable, filed an amended tax return. Signature of tax filer on IRS Tax Return Transcripts does not have to be signed by the tax filer (but is a good practice) 28

Verification Using the IRS Data Retrieval Process is the fastest, easiest, and most secure way to meet verification requirements May be done at either of two points: *initially FOTW filing *when using FOTW corrections 29

Ordering an IRS Account Transcript—Three Methods Online IRS website Phone Toll free IRS number Paper Obtain form online and mail to the IRS pdf/f4506tez.pdfhttp:// pdf/f4506tez.pdf

IRS WEBSITE Ordering an IRS Account Transcript—Method One: 31

Ordering an IRS Account Transcript Heightened Cash Monitoring 2 (HCM2)/Reimbursement 32 Heightened Cash Monitoring 1 (HCM1) Advanced Payment

Ordering an IRS Account Transcript online (Steps 1-3) Step 1: Click Order a Tax Return or Account Transcript Step 2 : Click Order a Transcript Step 3: Enter the tax filer’s information: SSN DOB Address 33

Ordering an IRS Account Transcript online (Steps 4-6) Step 4: Click Continue Step 5: Select Return Transcript under the Type of Transcript field Step 6: Select the appropriate year in the Tax Year filed (e.g., 2011) 34

TELEPHONE Ordering an IRS Account Transcript—Method Two: 35

Ordering an IRS Account Transcript by Telephone Step 1: Call the IRS at Step 2: Follow prompts to enter SSN and the numbers in their street address Step 3: Select “Option 2” to request a Tax Return Transcript Step 4: Enter the appropriate year 36

Ordering an IRS Account Transcript by Telephone Confirmation will be given when the process is completed 37

PAPER FORM Ordering an IRS Account Transcript—Method Three: 38

Ordering an IRS Account Transcript by Paper Form Step 1: Download Form 4506T- EZ at ub/irs-pdf/ f4506tez.pdf ub/irs-pdf/ Step 2: Complete lines 1-4 using instructions from p. 2 of the form Step 3: Line 5 allows for direct mailing of the transcript to a 3 rd party 39

Ordering an IRS Account Transcript by Paper Form Step 4: On line 6, enter the appropriate tax year (e.g., 2011 for the FAFSA) Step 5: The tax filer must sign & date the form and enter a telephone #. (Only one signature is required to request a transcript for a joint return.) Step 6: Mail/fax the completed form to the address/FAX # on page 2 of the form 40

Ordering an IRS Account Transcript by Paper Processing form 4506T-EZ means validating the information provided on the form. If any information does not match the IRS records, the IRS will notify the tax filer that it was not able to provide the transcript. 41

Things to Know about the IRS Account Transcript Tax filers can expect to receive a paper IRS Tax Return Transcript within days of successful validation IRS Tax Return Transcripts requested online cannot be sent to a 3 rd party if processed by web or phone order 42

Tax Transcript Sample (Part 1) 43

Tax Transcript Sample (Part 2) 44

Tax Transcript Sample (Part 3) 45

Tax Transcript Sample (Part 4) 46

Tax Transcript Sample (Part 5) 47

Tax Transcript Sample (Part 6) 48 Tax and Credits (cont.)

Tax Transcript Sample (Part 7) 49

Tax Transcript Sample (Part 8) 50

Tax Transcript Sample (Part 9) 51

Tax Transcript Sample (Part 10) 52

Tax Transcript Sample (Part 11)

Ordering an IRS Account Transcript Heightened Cash Monitoring 2 (HCM2)/Reimbursement 54 Heightened Cash Monitoring 1 (HCM1) Advanced Payment

Customized Verification ( ) 55

Verification Selection Current process In and , verification selection occurs when FAFSA is submitted for processing Central Processing System (CPS) applies risk model to FAFSA data If applicant, or parent of applicant, meets pre-determined risk criteria based on information provided on the FAFSA, CPS selects record to be verified by the school Applicants generally not re-subjected to CPS risk model when making FAFSA corrections 56

Verification Selection ISIR indicates in the Verification Flag field whether applicant has been selected– Y= Selected for verification N = Not selected for verification * = Selected on a subsequent transaction Federal Student Aid Handbook and Federal Register Notice –Provide written guidance on specific items to be verified for tax filers and non-tax filers –Describe acceptable documentation 57

Future Verification In the future, the ISIR will indicate – –Whether an applicant has been selected for verification, and –Specific item or items that must be verified 58

Customized Verification Like current process, applicant data will be subjected to risk model on 01 transaction Three categories of selection – Targeted selection -- data meets a risk criteria and record is selected for “targeted” verification Discretionary selection – data does not meet risk criteria for targeted selection, but is selected to verify a non-targeted data element Combination of targeted and discretionary selection 59

Targeted Selection Using FAFSA data elements to be verified as an example, if applicant is selected for targeted verification, he/she would verify - –Tax filers AGI* Taxes Paid Untaxed Income reported on Tax Returns –Untaxed IRA Distributions –Untaxed Pensions –Education Credits –IRA Deductions –Tax Exempt Interest Family Members* Number in College* * If eligible for Automatic Zero EFC 60

Targeted Selection –Non-tax filers Earned Income Family Members Number in College 61

Discretionary Selection If not selected for targeted verification, may be selected to verify discretionary data reported on the FAFSA Using as an example, data elements would include – –Food stamps –Child Support Paid In and beyond, would probably not select all applicants who reported these items on their FAFSA (i.e., would use “n” value, at least initially) 62

Targeted and Discretionary Combination of targeted and discretionary verification selection –Applicant met a targeted risk criteria PLUS –Was selected to verify one or more discretionary data elements from the FAFSA 63

The ISIR The Institutional Student Information Record (ISIR) would include – –Verification Flag (Y, N, *) –Fields for all FAFSA data elements subject to verification for a given year (per FR Notice) –Verification codes for each of those data elements indicating verification selection status Y =Data element selected for verification N=Data element not selected for verification V=Data element selected for verification, but student transferred data using the IRS data retrieval tool and did not change it 64

The ISIR The data elements selected for verification would be based on – –Applicant’s dependency status –Whether applicant was selected for targeted verification, discretionary verification, or both –Whether applicant is a tax filer or non-tax filer –Whether applicant is eligible for Auto Zero EFC or not –Whether applicant must verify HHS and # in college 65

Student Aid Report (SAR) The SAR will tell students that they were selected, but will not indicate the specific fields that need to be verified 66

Example 1 Dependent student, targeted selection, parent and student both tax filers, not eligible for Auto 0 EFC, did not use IRS Data Retrieval FAFSA Data ElementVerification Indicator Parent AGIY Parent Taxes PaidY Parent Untaxed Income (5 elements)Y Parent Income Earned from WorkN Parent Household SizeY Parent Number in CollegeY Parent Food Stamps ReceivedN Parent Child Support PaidN Student AGIY Student Taxes PaidY Student Untaxed Income (5 elements)Y Student Income Earned from WorkN Student Household SizeN Student Number in CollegeN Student Food Stamps ReceivedN Student Child Support PaidN 67

Example 2 Dependent student, parent and student filed a tax return, eligible for Auto Zero EFC, used IRS Data Retrieval Tool FAFSA Data ElementVerification Indicator Parent AGIV Parent Taxes PaidN Parent Untaxed Income (5 elements)N Parent Income Earned from WorkN Parent Household SizeY Parent Number in CollegeY Parent Food Stamps ReceivedN Parent Child Support PaidN Student AGIN Student Taxes PaidN Student Untaxed Income (5 elements)N Student Income Earned from WorkN Student Household SizeN Student Number in CollegeN Student Food Stamps ReceivedN Student Child Support PaidN 68

Example 3 Dependent student, parent received food stamps, selected to verify a discretionary item only FAFSA Data ElementVerification Indicator Parent AGIN Parent Taxes PaidN Parent Untaxed Income (5 elements)N Parent Income Earned from WorkN Parent Household SizeN Parent Number in CollegeN Parent Food Stamps ReceivedY Parent Child Support PaidN Student AGIN Student Taxes PaidN Student Untaxed Income (5 elements)N Student Income Earned from WorkN Student Household SizeN Student Number in CollegeN Student Food Stamps ReceivedN Student Child Support PaidN 69

New Verification Regulations Part of program integrity package Notice of proposed rulemaking: June 18, 2010 – pdfhttp://edocket.access.gpo.gov/2010/pdf/ pdf Final regulations: October 29, 2010 – pdfhttp://edocket.access.gpo.gov/2010/pdf/ pdf 70

Effective date for verification: July 1, 2012 Technical corrections: April 14, 2011 Dear Colleague letters –GEN-11-03, February 2011 –GEN-11-13, July 2011 Federal Register Notice: July 13, 2011 New Verification Regulations (cont’d) 71

Contact Information Nautochia Webb Sandy Santana