In the regulatory world of financial aid, there’s good news and bad news. Let’s start with the good news first: You survived the fall start for 17–18. With the new aid year upon us, hopefully, you’ve got a mailbox full of ISIR records sent in by your students.
The bad news? That full mailbox also means new verification requirements for 18–19.
New Verification Requirements for 18–19
We may all have gotten a little spoiled over the past few years because the Department of Education has generally been removing things—and that made our lives easier in the FA Office. Well, okay, maybe C Code 399 did not make anyone’s life easier. But in general, over the past few years, some verification groups have been retired and life hasn’t gotten harder.
This year we’re facing a few changes to verification—some of which are the unintended consequences of choices made by the Department and the IRS. Consider how these updates will impact your office and processes.
The same verification tracking groups will be active in 18–19 as were in 17–18 (V1, Standard; V4, Custom; V5, Aggregate). But there are verification requirements/document changes that will impact V1 and V5.
Documentation of Nonfiling No Longer Required for Dependent Students: Impacts V1 & V5. In 18–19, dependent students who do not file taxes will no longer need to provide documentation of nonfiling. All others—parents and independent students—will still need to provide documentation as appropriate, based on their verification group and Data Retrieval Tool (DRT) usage.
Auto Zero EFC: Impacts V1 and V5, Auto Zero EFC: Changes have been made to verification for students with an Auto Zero EFC.
— The number of household members—to determine if the independent student has one or more dependents other than a spouse
For Auto Zero EFC students, there is no change to the V4 requirements.
As of October 1, the Data Retrieval Tool is back in place for students to use to complete their 18–19 FAFSAs only. At this time, documentation for tax filers and nonfilers will revert to requirements of tax transcript/02 DRT code or IRS verification of nonfiling. However, at the discretion of the Department, leniency in documentation can be provided again in the future.
This existing flag is set when the applicant or parent uses the IRS Data Retrieval Tool, resulting in a Display flag of 02. But after submission of the FAFSA, a subsequent change made the applicant or parent ineligible to use the DRT. If an institution receives an ISIR with an IRS Request Flag value of 06, it must contact the applicant or parent to determine if the transferred information is correct—given the changes the applicant or parent made to IRS DRT eligibility criteria—and make any necessary changes to the applicant’s record.
This resolution is required of all applicants regardless of selection for verification.
The 07 IRS Request flag is new for 18–19, and indicates that the applicant or parent filed an amended tax return. This flag will be set when the applicant or parent links to the IRS, successfully authenticates, chooses to transfer his/her information into the FAFSA form, and the IRS determines that the tax filer has an amended return on file for the relevant tax year (2016 for the 18–19 FAFSA). However, the income and tax information that is transferred from the IRS will be from the originally filed tax return and will not include changes that were made on the amended tax return (IRS Form 1040X).
If an institution receives an ISIR with an IRS Request Flag value of 07, it must contact the applicant—or parent as applicable—and make any necessary changes to any of the data items, regardless of whether those items are required to be verified.
IRS Data Field Flags have been added to the ISIR to let you know exactly what field was changed in cases when the DRT was used and data values were changed by the student. In theory, this seems like it would be helpful to schools. However, regardless of the data element that was changed during the transfer, the documentation to clear it will most often be the tax transcript.
Since there has been no change to the requirement to fully review documentation collected to clear conflicting information, I’m not certain that this will reduce institutional or family burden—as the electronic announcement from August 7 suggests. Additionally, the Data Level Flags do not follow the same convention as the IRS Request Flag: When looking at the Field Level Flag, the 2 flag means that data has been changed prior to submission. After spending years of being conditioned that an 02 or 2 on the IRS Request Flag is a good thing, we now have to remember that IRS Data Level Flag indicates something very different. For more information, please see the 18-19 ISIR Guide page 30.
The Department has provided clarification around the definition of “valid government-issued ID.” This document states, “an unexpired, valid, government-issued photo identification is one that is issued by the U.S. government, any of the 50 states, the District of Columbia, the Commonwealth of Puerto Rico, a federally recognized American Indian and Alaska Native Tribe, American Samoa, Guam, the Virgin Islands, the Commonwealth of the Northern Mariana Islands, the Republic of the Marshall Islands, the Federated States of Micronesia, or the Republic of Palau.”
This will impact both V4 and V5 groups.
The masking and nonediting of data transferred through the IRS DRT process to both students and parents has resulted in the creation of two new comment codes. These new comment codes are meant to alert financial aid administrators that there is a possible issue or conflict in the data that was transferred.
— The parent is a tax filer (FAFSA Question 80) and the AGI retrieved from the IRS is zero, but the total income earned from work (FAFSA Questions 88 and 89) is greater than zero.
— The total of the Additional Financial Information fields reported (FAFSA Questions 93a–f) is greater than the AGI transferred from the IRS.
— Any item from the FAFSA list of Untaxed Income (FAFSA Questions 94a–i) is equal to or exceeds the AGI transferred from the IRS.
— Student is a tax filer (FAFSA Question 32) and the AGI retrieved from the IRS is zero, but the total income earned from work (FAFSA Questions 39 and 40) is greater than zero.
— The total of the Additional Financial Information fields reported on the FAFSA form (FAFSA Questions 44a–f) is greater than the AGI transferred from the IRS.
— Any item from the FAFSA list of Untaxed Income (FAFSA Questions 45a–j) is equal to or exceeds the AGI transferred from the IRS.
My favorite part of the announcement about the new comment codes is the following little nugget of fun:
“Sometimes there are reasons other than those outlined in this section why Comment Code 400 or 401 may appear on an ISIR. Those technical reasons do not require follow up by an institution. Therefore, once an institution has reviewed each of the conditions discussed above, it need not take any further action.”
Interesting (and frustrating), right? And it makes one wonder, why not just FIX things so that the comment codes only appear when they fall into one of the above described buckets?
Oh well, I guess we will live to fight that battle another day…