Verification PA Association of Student Financial Aid Administrators Conference October 2011 Annmarie Weisman Training Officer

2 What is Verification? …let’s review Process by which certain required data reported on the FAFSA is reviewed for accuracy and completeness Verification regulations at 34 CFR §668, Subpart E Required Verification policies regulations: 34 CFR §

Required Verification Policies Must have written P&P on the following: –Applicant responsibilities/deadlines for submitting documents and consequences of not meeting deadlines –Method of notifying students of post- verification award changes –Student corrections –Referring overpayment cases to ED (More) 3

Required Verification Policies (cont.) Must also give each applicant selected for verification a written statement explaining: –Documents required for verification –Student responsibilities—correction procedures, deadlines for completing any actions required, and consequences of missing the deadlines –Notification methods—how your will notify a student of resulting award changes, and the time frame for notification 4

5 How Are Applicants Selected? CPS selection –Edit checks identify potential errors and inconsistencies –Random selection School selection –School criteria 30% option ends in 11-12

6 What Documents Do I Need? For taxable income, base year tax return For untaxed income and benefits: –Official agency documentation –Verification worksheet –Signed statement Details on acceptable documents are listed in the FSA Handbook and Federal Register 6

IRS Data Retrieval Process and Verification An institution may consider information retrieved through the IRS data retrieval process as acceptable verification documentation if: –The Secretary has identified those items as having come from the IRS and –The items have not been changed –IRS Request Flag = 02 7

How Do I Complete the Process? Compare the documents with the original FAFSA information –May use a checklist in the file –May use verification tool on FAA Access Determine if: –Information is correct –Tolerance option may be used –Corrections must be made 8

Verification Tolerance AY No recalculation or reprocessing required if –no change in non-dollar items used to calculate EFC* AND –no dollar amount in excess of $ AY and forward No recalculation or reprocessing required if –no change in non-dollar items used to calculate EFC* AND –no dollar amount in excess of $25 9 *Remember, some items affect the EFC that are not obvious.

10 Verification Status Codes Used when reporting Pell and Direct Loan payments to COD V = Verified S = Selected, but not verified W = Paid without Documentation Blank = ISIR not selected by CPS or school

Interim Disbursements* while Verification Incomplete If a school has no reason to suspect that application information is incorrect: –Pell, FSEOG and Perkins: may make one disbursement for applicant’s first payment period –FWS: employee may work for a maximum of 60 consecutive days from start of enrollment –Direct Loans: may originate (but not disburse) subsidized loans *TEACH, PLUS, and Unsubsidized Direct Loans are not subject to verification/interim disbursements 11

12 Update Applicant Information For any student, must always update a student’s dependency status if it changes during an award year* For students selected for verification, must always update household size and number in college at the time of verification* *Unless the reason is a change in the student’s marital status (may make this change in 12/13 & forward)

“Non-Verification” Reminders Regardless of verification status –Must resolve all “C codes” –Must resolve all conflicting information Separate process from verification Includes any information of which the school has knowledge Done prior to disbursement 13

Verification and Professional Judgment If applicant is selected for verification (by CPS or school): –MUST verify before performing PJ If applicant NOT selected for verification: –Verification NOT required –May perform PJ as usual 14 Mistaken belief that you must verify to do a PJ…

Information to Verify

Verification Guidance ( process) Dear Colleague Letter (DCL) GEN –July 13, 2011 Federal Register details FAFSA information to be verified for AY –Summarizes the process for AY Citations: 34 CFR §§ through

Verification Selection Process and ISIR Flags Long-term goal: customized verification based on applicant info. –Will identify for a selected applicant only the info. that requires verification based upon that applicant’s data –Current process requires review of items for all applicants selected for verification 17

Verification Process (cont.) Long-term goal: customized verification –Need more historical FAFSA data to develop the customized verification model ED is not implementing a fully customized verification process for the AY is a variation of the current process –Analysis will be used to select applicants with the highest probability of error 18

Verification Process (cont.) A SAR/ISIR will include only one verification flag to indicate selection –An applicant whose ISIR is so flagged must verify the info. included in the July 13, 2011 Federal Register 19

Information to Verify Information is to be verified for the applicant and, if appropriate, his or her parent(s) or spouse for all applicants selected for verification: –# of household members –# in college –Food Stamps - if reported –Child Support Paid - if reported 20

Information to Verify Item: # of household members Documentation: signed statement Exceptions: Verification of this item not required for a dependent applicant when the marital status of the parent(s) of the applicant is: –separated or unmarried (single, divorced, or widowed) and family size on the FAFSA = 2 –married and family size on the FAFSA = 3 21

Information to Verify Item: # of household members (cont.) Documentation: signed statement Exceptions: Verification of this item not required for an independent applicant when the marital status is: –separated or unmarried (single, divorced, or widowed), and the family size on the FAFSA = 1 –married and the family size on the FAFSA = 2 22

Information to Verify Item: # of household members enrolled at least ½ time in eligible post-secondary institutions Documentation: signed statement (or written document from post-secondary institution confirming enrollment if requested) Exception: Verification not required if # in college on the FAFSA = 1 23

Information to Verify Item: Food Stamps - Supplemental Nutrition Assistance Program (SNAP) - if receipt is indicated on the FAFSA Documentation: copy of document from providing agency Exceptions: None No need to verify amount, just receipt of benefit 24

Information to Verify Item: Child Support Paid - if reported on the FAFSA Documentation: signed statement (or copy of document from court, person receiving support, or coordinating agency if requested) Exceptions: None 25

Info. for Tax Filers When Applicant Selected for Verification Adjusted Gross Income (AGI) U.S. income tax paid Untaxed Income - only the following untaxed income if reported on the FAFSA - –Untaxed IRA distributions –Untaxed pensions –Education credits –IRA deductions –Tax exempt interest 26

Info. for Non-Tax Filers When Applicant Selected for Verification Item: Income earned from work Documentation: W-2 form and signed statement that not required to file and the sources of the income Exceptions: None 27

Less Burdensome Verification Using the IRS Data Retrieval Process is the fastest, easiest, and most secure way to meet verification requirements *initially FOTW filing *FOTW corrections 28

IRS Data Retrieval Applicants who use the IRS Data Retrieval Process to transfer their tax return info. and do not subsequently change the data will be considered to have verified the applicable FAFSA info (AGI, taxes paid, and any applicable untaxed income items) –Code 02 (IRS retrieval used & data unchanged) 29

\ 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 –the institution has reason to believe that the data transferred is inaccurate (no routine requests) –a married independent applicant and spouse –or- the parents of a dependent student filed separate tax returns …but, wait, there’s more… 30

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 (December 31) –the applicant, or parent, or spouse (as applicable) filed an amended tax return. Signature of tax filer not required on IRS Tax Return Transcripts 31

Exceptions to IRS Tax Transcript Requirement In limited circumstances, if an institution determines that obtaining an IRS Tax Transcript is not possible, the institution may accept a signed copy of the tax return –Must document the reason for allowing an applicant to do so –Example: tax return from foreign country or Puerto Rico 32

Interpreting the IRS Account Transcript ED will provide further guidance to schools on how to read the IRS Tax Transcript (locating the info you need on the document) Stay tuned to ifap! 33 Where are the line item numbers?

Where can you find help? FSA Assessments –Guide to Creating a Policy & Procedures Manual –Management Enhancement Worksheets FSA’s Institutional Improvement Specialists FSA Application and Verification Guide, Ch. 4

Other Resources Preamble to the Program Integrity Notice of Proposed Rulemaking (NPRM) - 75 FR 34825–34834 (June 18, 2010) Preamble and Subpart E of the Program Integrity Final Regulations -75 FR 66902–66913 and 66954– (October 29, 2010) Dear Colleague Letter GEN–11– –2013 ISIR Guide 2012–2013 SAR Comment Codes and Text 2012–2013 COD Technical Reference 36

School Participation Team (SPT) Contact Information The Institutional Improvement Specialists (IISs) are part of the SPT.

Contact Information For follow-up questions about this session, contact me at: –Annmarie Weisman, Training Officer – To provide feedback to my supervisor: –Tom Threlkeld, Supervisor –

Your Region III Training Team Greg Martin, Training Officer – Craig Rorie, Training Officer – Annmarie Weisman, Training Officer – Thank you!

QUESTIONS?

Supplemental Information 41

Ordering an IRS Account Transcript—Three Methods Online IRS website Phone Toll free IRS number Paper Obtain form online and mail to the IRS

IRS WEBSITE Ordering an IRS Account Transcript—Method One: 43

Ordering an IRS Account Transcript Heightened Cash Monitoring 2 (HCM2)/Reimbursement 44 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 45

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) 46

TELEPHONE Ordering an IRS Account Transcript—Method Two: 47

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 48

Ordering an IRS Account Transcript by Telephone Confirmation will be given when the process is completed 49

PAPER FORM Ordering an IRS Account Transcript—Method Three: 50

Ordering an IRS Account Transcript by Paper Form Step 1: Download Form 4506T- EZ at /irs-pdf/ f4506tez.pdf /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 51

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 52

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. 53

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 54

IRS TAX TRANSCRIPT SAMPLE SUPPLEMTAL INFORMATION: 55

Tax Transcript Sample (Part 1) 56

Tax Transcript Sample (Part 2) 57

Tax Transcript Sample (Part 3) 58

Tax Transcript Sample (Part 4) 59

Tax Transcript Sample (Part 5) 60

Tax Transcript Sample (Part 6) 61 Tax and Credits (cont.)

Tax Transcript Sample (Part 7) 62

Tax Transcript Sample (Part 8) 63

Tax Transcript Sample (Part 9) 64

Tax Transcript Sample (Part 10) 65

Tax Transcript Sample (Part 11)

The End! 67