Close Encounters of the
Verification Kind
Travis L. Brown
Director of Financial Aid
American InterContinental University
Something Old; Something New
The verification regulations reside in 34
CFR 668, Subpart E
This subpart was revised in the final
regulations published on October 29, 2010
These Subpart E regulations take effect July
1, 2012
While SOME things changed, much
remained the same
Required Policies (668.53)
You must have WRITTEN policies and
procedures on:
Deadlines for submitting documentation
And the consequences for missing them
How you’ll notify students if verification
changes the award
Required correction procedures
Procedures for referring overpayment cases
BUT WAIT! There’s more…
You must give each student selected “in a
timely manner...a clear explanation of”:
Required documents
Student responsibilities
Deadlines for completion
Consequences of “failing to complete any required
action”
Professional Judgment (New)
“An institution’s procedures must provide
that an applicant whose FAFSA information
is selected for verification is required to
complete verification before the institution
exercises any authority under section
479(A) of the [Higher Education Act] to
make changes…(668.53(c))
Who Must Be Verified
Applicant selected by Central Processing System
(CPS) or the school
CPS selected: The “SAR with the star”
Any application the school believes has either
incorrect or discrepant information
As required under 668.54(a)(2) and 668.16(f)
Any additional application(s) the school selects
You can select ‘em all! (I do)
Limitation/Exclusions (New)
There will be NO MORE “30% verification cap!”
You can exclude:
Deceased applicant
Not a Title IV, HEA program recipient
“[E]ligible to receive only unsubsidized student
financial assistance”
Verified by another school (with conditions)
Parents unavailable or mentally incapacitated
Spouse deceased/mentally incapacitated/unavailable
(for independent students)
Important Caveat
“Conflicting Information” MUST ALWAYS be
resolved, regardless of verification status.
“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.”
(2010-11 Application & Verification Guide
(AVG), p. 106)
What Must You Verify?
If CPS-selected, you must CURRENTLY
verify:
Household size
Number enrolled in college
Adjusted gross income (AGI)
U.S. income tax paid
Certain untaxed income and benefits
Legal citation: 34 CFR 668.56(a)
What Must You Verify Starting
in 2012-13?
“For each award year the Secretary
publishes in the Federal Register notice the
FAFSA information that an institution and
an applicant may be required to verify.
“For each applicant whose FAFSA…is
selected…the Secretary specifies the
specific information…that the applicant
must verify.” (668.56(a) and (b))
What CAN You Verify?
“In addition to verifying these required items for
CPS-selected students, you can choose to verify
any other application items, requiring any
reasonable documentation, in accordance with
consistently applied institutional policies. You
may decide which students must provide
documentation for any additional data elements
and what constitutes acceptable documentation.”
(AVG-85)
Collecting Verification
Information
You basically need to collect a properly signed
verification worksheet or other properly signed
documentation and
Signed copies of the appropriate tax returns
“You should remind your students that they must
submit the completed worksheet and copies of the
relevant income tax returns…to your financial aid
office, not to the [U.S.] Department of Education.”
(AVG-85)
Verifying Household Size
“If the student completed the Department’s
verification worksheet, no further documentation
for this item is required.” (AVG-86)
Instead of the worksheet, you may accept a signed
statement listing:
Names of household members
Their ages
Their relationship to the student
Verifying Household Size
You don’t have to verify this when:
It’s the same as reported and verified in the previous
award year
You receive the SAR or ISIR within 90 days after the
date the application was signed
For a dependent student, a married household size of 3
or a single-parent household size of 2
For an independent student, a married household size of
2 or a single household size of 1
Verifying Number in College
“If the student completes the Department’s
verification worksheet, no further
documentation for this item is required.”
(AVG-86)
Instead of the worksheet, you may accept a
signed statement listing:
The names and ages of those enrolled
The names of the schools they plan to attend
Verifying Number in College
You don’t have to verify this when:
The reported number enrolled is 1 (the student)
You receive the SAR or ISIR within 90 days
after the date the application was signed
The family members listed are enrolled at least
half-time at your school, and you’ve confirmed
their enrollment internally
Verifying AGI and U.S. Income
Tax Paid
“To verify AGI and taxes paid, you must first
identify everyone whose financial data was
reported on the FAFSA and which tax returns, if
any, they filed. You must check the tax returns for
anyone whose financial data were reported on the
FAFSA: the student and his spouse or parents if
applicable…The type of [tax return filed] reported
on the FAFSA should match what the student and
parents actually filed.” (AVG-87)
Verifying AGI/Taxes Paid
“For verification purposes, you can accept a copy
(such as a photocopy, fax, or digital image) of the
original signed return filed with the IRS.
“If a fax, photocopy, or other acceptable copy was
made of an unsigned tax return, the filer (or at
least one of the filers of a joint return) must sign
the copy.
“You can [also] accept a tax form that has been
completed to duplicate the filed return; [it] must
contain at least one filer’s signature.” (AVG-87)
Verifying AGI/Taxes Paid
You may also accept a paper return on which the
preparer has stamped, typed, signed or printed
his/her name (NOT the company’s name) and
his/her SSN, EIN (Employer ID Number), or
PTIN (Preparer Tax ID Number).
You may also accept a copy of an IRS form with
tax information mailed directly to your school by
the IRS.
If mailed to you by the filer(s), must have a filer’s
signature
Special Tax Filing Situations
These include (from AVG-88 & 89):
Electronic filers
Non-filers
Filing extensions
Fiscal year tax returns
Nonresident filers
Foreign income
Tax return not available
Tax transcript or copy of tax return
What Will Change in 2012-13?
Section 668.57 addresses “Acceptable
documentation”
It references four areas:
“Adjusted Gross Income (AGI), income earned
from work, or U.S. income tax paid
“Number of family members in household
“Number of family household members
enrolled in eligible postsecondary institutions
“Other information”
Verifying Untaxed Income and
Benefits
Three specific types must currently be
verified:
Child support
IRA/Keogh deductions
Interest on tax-free bonds
Verifying Untaxed Income and
Benefits
“In addition, you must verify all other
untaxed income reported on the U.S.
individual income tax return (excluding
schedules).” (AVG-90)
ANY untaxed income and benefits that
must be reported on the FAFSA are subject
to verification.
Verifying Untaxed Income and
Benefits
“Except for child support, the required items can
be verified using the tax return or alternative tax
documents.
“Non-filers should submit a signed statement
confirming that they did not file a tax return and
listing the amount and specific sources of untaxed
income and benefits by name.” (AVG-90)
Untaxed income and benefits from any
governmental source, granted on the basis of a
financial need assessment, need not be verified.
Verifying Child Support
Received
MUST verify if reported or you believe it
was received but not reported
Completed verification worksheet sufficient
If questions, can request:
Copy of divorce decree/separation agreement
Signed statement from the parent who’s paying
Copies of cancelled checks/money order
receipts
Verifying IRA/Keogh
Deductions
Verified using the tax return
Applicable line items appear on page 1 of
both Form 1040 and Form 1040A
Verifying Interest on Tax-Free
Bonds
Verified using the tax return
Applicable line items appear on page 1 of
both Form 1040 and Form 1040A
Various and Sundry
You can make interim disbursements of aid while
verification is pending
One disbursement of Pell/Perkins/FSEOG
Up to 60 days employment for FWS
Can originate DL, but can’t disburse
A student can be selected for verification AFTER
a disbursement has been made
Caused by subsequent CPS transaction
May cause repayment of previously disbursed aid
Various and Sundry
There is a current verification tolerance of $400
Allowance for “minor errors” that don’t affect
eligibility
How to determine tolerance:
Add original (incorrect) AGI and untaxed income;
subtract original U.S. income tax paid
Do the same for the correct values
If original total vs. corrected total is $400 or less, no
need to correct (but can )
NO tolerance for non-dollar items (e.g., HH size)
Changes for 2012-13
668.59(a): “For the subsidized student
financial assistance programs, if an
applicant’s FAFSA information changes as
a result of verification, the applicant or the
institution must submit to the Secretary any
changes to—
(1) A nondollar item; or
(2) A single dollar item of $25 or more.”
“Subsidized Student Financial
Assistance Programs?”
Defined in 668.52
“Title IV, HEA programs for which
eligibility is determined on the basis of an
applicant’s EFC.”
Federal Pell Grant
Federal SEOG
Federal Work-Study
Federal Perkins Loan
Direct Subsidized Loan
Various and Sundry
“A Pell applicant selected for verification must
complete the process by the deadline published in
the Federal Register. [For 2010-2011] the
deadline is expected to be September 26, 2011, or
120 days after the last day of the student’s
enrollment, whichever is earlier. Campus-based
…applicants must complete verification by the
same deadline or by an earlier one established by
your aid office.” (AVG-94)
Various and Sundry
Late Disbursements
“Generally a student ceases to be eligible for
aid once he has finished the term and is no
longer enrolled. However, he may submit
verification documentation and receive a late
disbursement after that time if the Department
processed a SAR or ISIR with an official EFC
while he was still enrolled.” (AVG-94)
Correcting, Updating and
Adjusting
You can correct anything incorrectly
reported on the original FAFSA submission
Only a few answers from the FAFSA can be
updated to reflect changes after the FAFSA
was signed
You can use your professional judgment to
adjust reported information to account for
special circumstances
Correcting
Three options with correcting:
Error doesn’t affect eligibility
Correction increases eligibility
Correction decreases eligibility
Guidance contained in AVG-101 and 102
Updating
Only three items can currently be updated:
Household size
Must be updated to be correct at time of verification
Can only be updated if selected for verification
Number in college
Must be updated to be correct at time of verification
Can only be updated if selected for verification
Dependency status
Must update if this changes during award year
CANNOT be updated if due to change in marital status
Update must be performed even if not selected for verification
Updating in 2012-13
668.55(c): “An institution may require an
applicant to update FAFSA information
under paragraph (a) [dependency status] or
(b) [household size/number in college] of
this section for a change in the applicant’s
marital status if the institution determines
the update is necessary to address an
inequity or to reflect more accurately the
applicant’s ability to pay.”
Adjusting
“An aid administrator may use professional
judgment (PJ), on a case-by-case basis only,
to alter the data elements used to calculate
the EFC. The alteration is valid only at the
school making it.” (AVG-104)
CANNOT “…modify either the formula or
the tables used in the EFC calculation…”
Document, document, document!!
Discrepant Tax Data
“…FAAs must have a fundamental
understanding of relevant tax issues that can
considerably affect the need analysis. You
are obligated to know: (1) whether a person
was required to file a tax return, (2) what
the correct filing status for a person should
be, and (3) that an individual cannot be
claimed as an exemption by more than one
person.” (AVG-107)
Required to File
For 2010, a tax return must be filed when:
Single filer under age 65 has gross income of at least
$9,350
Married filing jointly filers are both under 65 and have
gross income of at least $18,700
Married filing separately of any age and have gross
income of at least $3,650
Head of household under 65 and have gross income of
at least $12,050
Qualifying widow(er) with dependent child under 65
and have gross income of at least $15,050
Definition of “Gross Income”
“Gross income means all income you
received in the form of money, goods,
property and services that is not exempt
from tax, including any income from
sources outside the United States or from
the sale of your main home (even if you can
exclude part or all of it).” (IRS Publication
17, Your Federal Income Tax, p. 4)
Correct Filing Status
The IRS recognizes five filing statuses:
Single
Married Filing Jointly
Married Filing Separately
Head of Household
Qualifying Widow(er) With Dependent Child
Filing Status Definitions
“Your filing status is single if, on the last
day of the year, you are unmarried or
legally separated from your spouse under a
divorce or separate maintenance decree, and
you do not qualify for another filing status.”
(Publication 17, p. 20)
Filing Status Definitions
“You can choose married filing jointly as
your filing status if you are married and
both you and your spouse agree to file a
joint return. On a joint return, you report
your combined income and deduct your
combined allowable expenses. You can file
a joint return even if one of you had no
income or deductions.” (Pub. 17, p. 20)
Filing Status Definitions
“You can choose married filing separately
as your filing status if you are married. This
filing status may benefit you if you want to
be responsible only for your own tax or if it
results in less tax than filing a joint return.”
(Pub. 17, p. 20)
Filing Status Definitions
“You may be able to file as head of
household if you meet all the following
requirements:
You are unmarried or ‘considered unmarried’ on the
last day of the year.
You paid more than half the cost of keeping up a home
for the year.
A ‘qualifying person’ lived with you in the home for
more than half the year (except for temporary absences,
such as school).” (Pub. 17, p. 21)
HoH Filing Status Definitions
How is one “considered unmarried?”
Five tests:
You file a separate return
You paid more than half the cost of keeping up your home for the
tax year
Your spouse did not live in your home during the last 6 months of
the tax year (does not include temporary absences)
Your home was the main home of your child, stepchild, or foster
child for more than half the year
You must be able to claim an exemption for the child (Pub. 17, pp.
20-21)
HoH Filing Status Definitions
Who is a “qualifying person?”
It’s more complex than this, but basically,
it’s a:
Son, daughter, or grandchild who lives with you more
than half the year and meets certain other tests
Qualifying relative who is your father or mother
Qualifying relative other than your father or mother
(such as a grandparent, brother, or sister who meets
certain tests) (Pub. 17, p. 22)
HoH Filing Status Definitions
What is a “temporary absence?”
“You and your qualifying person are considered to
live together even if one or both of you are
temporarily absent from your home due to special
circumstances such as illness, education, business,
vacation, or military service. It must be reasonable
to assume that the absent person will return to the
home after the temporary absence. You must
continue to keep up the home during the absence.”
(Pub. 17, p. 23)
Filing Status Definitions
“If your spouse died in 2010, you can use married
filing jointly as your filing status for 2010 if you
otherwise qualify to use that status. The year of
death is the last year for which you can file jointly
with your deceased spouse.
“You may be eligible to use qualifying widow(er)
with dependent child as your filing status for two
years following the year your spouse died [if you
have not remarried].” (Pub. 17, p. 23)
References
Federal Register, October 29, 2010
Part II, Department of Education
34 CFR Parts 600, 602, 603, et. al.
Program Integrity Issues; Final Rule
2010-11 Handbook of Federal Student Aid
Application and Verification Guide
Chapter 4: Verification
Chapter 5: Corrections, Updates, and Adjustments
References
IRS Publication 17, Your Federal Income
Tax For Individuals, For use in preparing
2010 returns