New ED Guidance Provides Verification Relief for Students
Thursday, January 10, 2019
Posted by: MorraLee Keller, Director of Technical Assistance
Earlier this week, the Department of Education released new guidance to financial aid professionals about the types of documents that can be used to verify a student’s income information. As a result of this much-anticipated guidance, colleges can now accept copies of signed tax returns as documentation – tax transcripts are no longer required.
This guidance is effective immediately and is for both the 2018-19 and 2019-20 academic years.
Here is a key excerpt from the electronic announcement issued by the Department:
Income Tax Return – Institutions may accept as acceptable documentation a signed copy of the 2016 or 2017 income tax return, as applicable, that the tax filer submitted to the IRS or other tax authorities to verify FAFSA/ISIR income and tax return information. Institutions are reminded that tax account information obtained from the IRS through the Internal Revenue Service Data Retrieval Tool (IRS DRT) that has not been changed and a transcript from the IRS or other tax authorities continues to be acceptable documentation.
Verification of Nonfiling – Individuals are still required to obtain verification of nonfiling (VNF) from the IRS or other tax authorities. However, if the individual is unable to obtain VNF from the IRS or other tax authorities and, based upon the institution’s determination, it has no reason to question the student’s or family’s good-faith effort to obtain the required documentation the institution may accept—
- A signed statement certifying that the individual—
- Attempted to obtain the VNF from the IRS or other tax authorities and was unable to obtain the required documentation; and
- Has not filed and is not required to file a 2016 or 2017 income tax return, and a listing of the sources of any 2016 or 2017 income earned by the individual from work and the amount of income from each source; and
- A copy of IRS Form W–2, or an equivalent document, for each source of 2016 or 2017 employment income received by the individual.
This guidance, which was first announced at the Federal Student Aid Training Conference last November, is a welcome relief and should reduce the verification burden on the students we serve. Verification is the audit-like process that many low-income students must go through to prove that the information included on their FAFSA is accurate. Only 56 percent of Pell-eligible students selected for verification go on to receive a Pell Grant, in comparison to 81 percent of Pell-eligible students not selected for verification. (For more on verification, see NCAN’s recent white paper "FAFSA Verification: Good Government or Red Tape?")
The online IRS tool for ordering tax transcripts has been down since the beginning of the year, so some students have been unable to get the documentation they need to complete the verification process. It is good news for students, college access personnel, and college financial aid administrators that tax transcripts are no longer the only option for verifying income.
NCAN members should still encourage students to use the IRS DRT, as that will likely reduce a student’s chance of being selected for verification. And we encourage students currently in the verification process to reach out to their institution(s) to determine how verification will be handled moving forward.
NCAN applauds the Department of Education for taking these steps. We thank our colleagues at NASFAA for their diligence and efforts for getting this information out to their members.