Verification. A Verification Funny “I told a student we needed his Independent Verification...

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 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

AGI and Tax Paid

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).

Untaxed Income and Benefits

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 Tolerance

Verification Tolerance

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 Studies

Four “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.

Verification