ADVANCED
VERIFICATION
PASFAA CONFERENCE 2010
LANCASTER, PA
Marykay Klara
Associate Director of Financial
Assistance
Villanova University
POLICIES
• “Because students sometimes
make errors on their application,
colleges have procedures for
verifying the reported
information.” (2010 AVG 81)
POLICIES
• “If your school has conflicting
information concerning a student’s
eligibility or you have any reason to
believe a student’s application
information is incorrect, you must
resolve the discrepancies before
disbursing FSA funds. If you discover
discrepancies after disbursing FSA
funds, you must still reconcile the
conflicting information and take
appropriate action under the
specific program requirements.”
(2010 AVG 106)
POLICIES
• “While Financial Aid
Administrators do not need to be
tax experts there are some issues
that even a layperson with basic
tax law information can evaluate.
Because conflicting data often
involve such information, FAA’s
must have a fundamental
understanding of relevant tax
issues that can considerably affect
the need analysis…” (2010 AVG
107)
BASIC REQUIRED
VERIFICATION ITEMS
•
•
•
•
•
Household size
Number in college
Adjusted gross income (AGI)
U.S. taxes paid
Certain types of untaxed income and
benefits:
➔ Child support
➔ IRA/Keogh deductions
➔ Interest on tax-free bonds
• All other untaxed income included on
the U.S. income tax return, excluding
information on the schedules
(34 CFR 668.56) (AVG 81)
ADVANCED VERIFICATION
POSSIBILITIES
• INCOME
• SAVINGS AND DIVIDENDS
• CAPITAL GAINS/LOSSES
• RENTAL PROPERTY
EARNED INCOME
Line 7 of Tax Return
• Check against W-2 Forms (box 1 vs.
box 5)
• Other income –tips
• 1099 Form – consultant or part/time
employee (compensation)
Earnings
INCOME
Line 11 of Tax Return
– Alimony Received
– May indicate Child Support exists
Possible child support
BUSINESS INCOME
Line 12 of Tax Return
• Schedule C
– Possible Income from working at home
(line 1)
May be income from working at home
High debt for
equipment in the
home
Earned income
BUSINESS INCOME
Line 17 of Tax Return
• Schedule E
– Book Royalties
– Property Management and Rental Income
– Potential assets of the family
» rental property
Potential Assets
Do you add this to income?
BUSINESS INCOME
Line 18 of Tax Return
• Schedule F
– Farm Income
Do they live on the farm or is it an investment
property?
INCOME
Line 19 of Tax Return
• Unemployment Compensation
– Taxed and Untaxed
Taxed and untaxed
OTHER INCOME
Line 21 of Tax Return
• Other income
• What is it?
Source of Income
ASSETS
Line 8 - Interest Income
• Schedule B
• Does savings support the amount
reported?
• How do you compute a value?
Assets – do not
include life insurance
ASSETS
Line 9 - Dividend Income
• Schedule B
• Does investments support the amount
reported?
• Usually better to impute a higher rate
as these assets are riskier and have
better rates of return
Riskier Assets
ASSETS
Line 13 – Capital Gains/losses
• Schedule D
Line 14 – Other Gains/losses
• What created the amount listed –
stocks sold?
• Review amounts listed on Line 3 and
Line 10 – should have at least a
combined amount listed in
savings/investments
Cash received
Cash received
ASSETS
Schedule C
– Line 16 (mortgage interest)
– Line 20 (rent or lease) – is the
building tied to the business and is
it listed on Schedule E as parents’
personal asset?
If working from
home what is this?
If working from home what is
this?
ASSETS
Schedule E
– Is it business related or personal?
– Royalties – what did they do with all
of the income earned
– Rental Property
• calculate net worth %
• www.zillow.com
Watch for more than one
property listed
Do you add this back to income?
Value computed or on a
form?
This is only for the year in
question – not overall
ASSETS
Form 8825 – Rental Real Estate
Income and Expenses of a
Partnership or S Corporation
– Line 2
Gross Rents
• Is income tied to a business or
personally owned rental property
made to look like a business?
What type of property is this – is it really a business?
If personal property – can be
source of value