CPS jumps the gun on the 2011 tax filing deadline.

On Tuesday, March 13, 2012 Federal Student Aid’s Central Processing System sent out a notice to all those early FAFSA filers who indicated that they “will file” but have not yet completed their 2011 Federal Income Tax Return, on their 2012-2013 FAFSA. The message left some FAFSA filers wondering if they had missed the traditional April 15, 2012 Federal Income Tax Filing deadline. An Ed official who spoke on the condition of anonymity stated “this was just an early April Fools joke.”  Nonetheless, it’s always good practice to proofread your email communications to students before hitting the send button.

This year, the official deadline to file your 2011 Federal income Tax Return is Tuesday, April 17, 2012.

A sample of the erroneous email is below.

When you completed your 2012-2013 Free Application for Federal Student Aid (FAFSA), you indicated that you were going to file your taxes and were providing estimated 2011 tax information.  Now that the federal tax filing deadline has passed and you have probably filed your 2011 tax returns, it is time for you to update your FAFSA. You can update your FAFSA at www.fafsa.gov.  You should change your answer on the FAFSA (question 32) to reflect that you have “already completed” your tax return.  Once you’ve made this change, you will need to update the information you initially reported on the FAFSA to reflect the actual information from the 2011 tax return you filed.  If you filed a federal tax return with the IRS, when you access your FAFSA online, you may be eligible to use the IRS Data Retrieval Tool, which is the best and easiest way to provide accurate tax information.  With just a few simple steps, you can view information from your IRS tax return and transfer that information directly into your FAFSA.
If you are unable to use the IRS Data Retrieval Tool, you are still required to update the income information on your FAFSA so that it reflects the information on the 2011 tax return you filed.  The tax-related questions you should review on your FAFSA include adjusted gross income, income tax paid, number of exemptions, and income earned from work.  You should also ensure that your FAFSA correctly identifies the type of tax return that was filed (IRS 1040, 1040A, 1040EZ, foreign tax return, etc.) and that you have entered the correct amounts for Additional Financial Information (questions 43a-f) and Other Untaxed Income (questions 44a-j).
It is important that you make the necessary changes to the tax information so that your FAFSA includes the same information that was included on your tax return.  However, when making corrections based on your completed federal tax returns, do not update other information that was correct at the time you filed your FAFSA.  For example, do not change your answer for household size (question 93) or for number in college (question 94); unless your answer was incorrect as of the date your FAFSA was originally signed.
Your ability to receive federal student aid can be impacted if you do not make the necessary updates or corrections.
Thank you for your attention to this important matter.  If you have additional questions regarding the IRS Data Retrieval Tool, online help is available.  Visit www.fafsa.gov and click the “Browse Help” feature on the FAFSA home page for information on the tool and the FAFSA process.

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2012-13 FAFSA Verification-IRS Tax Return Transcript Matrix

Just days after NASFAA released it’s overly complicated version of an IRS Tax Return Transcript Matrix exclusively to NASFAA members, David Bergeron and the good folks at FSA made good on their promise to release one to the FSA community. In a simple to use, one page Excel document, the Ed version, compares the seven ISIR information items that may need to be verified for a student or parent who filed or will file a 2011 Federal Income Tax return to the item name reported on the IRS Tax Return Transcript as well as  the corresponding line item numbers from the three 2011 IRS tax returns.

You can get a copy of the matrix here: 2012-2012 IRS Tax Return Matrix

The February 24th, 2012 Electronic Announcement offers some guidance on interpreting the transcript as well – so aid administrators, pay attention:

…for some items the transcript may  report two or three values.  This is  because the IRS calculates or recalculates the amount reported by the tax filer  for some items.  If only one value is  reported on the transcript that value must be used for verification.  If more than one value is reported on the  transcript, the value associated with the item name that includes the words  “Per Computer” must be used for verification.  The “Per Computer” line should be used for  verification even if it is different than what was reported by the tax filer.

This is great guidance!

You can read the full Electronic Announcement here: February 24, 2012 Electronic Announcement – (General) Subject:  2012-13 FAFSA Verification-IRS Tax Return Transcript Matrix

An unusual verification scenario

A colleague recently encountered an unusual verification scenario. When a student filed head of household on her Federal Income Tax returns and listed her spouse and child in the household size, she decided to examine the situation closer to ensure that all of the information in the file was consistent. She knew that in order to file as head of household, the student generally couldn’t be married and she set out to identify any conflicting information.

When she interviewed the student, she explained that she was married in another country and that although she was a Permanent Resident herself, her husband who was unemployed, was a nonresident alien. Since he didn’t work, he didn’t file taxes. She remarked that she and her husband were not considered married in the United   States. This didn’t sound right to the experienced financial aid administrator, so she pulled out good-old IRS Publication 17 to do some research.

She knew right where to look, and thumbed to the page on Head of Household.

It read:

Head of Household

You may be able to file as head of household if you meet all the following requirements.

  1. You are unmarried or “considered unmarried” on the last day of the year.
  2. You paid more than half the cost of keeping up a home for the year.
  3. A “qualifying person” lived with you in the home for more than half the year (except for temporary absences such as school). However, if the “qualifying person” is your dependent parent, he or she does not have to love with you.

She reread the first requirement aloud, recalling the student’s similar statement. “You are unmarried or “considered unmarried” on the last day of the year.”

What did that mean?

She read on, eventually finding her answer.

It read:

Nonresident alien spouse.  You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other tests to be eligible to file as head of household.

Much to her surprise, the student’s story checked out and she quickly phoned the student to give her the good news. She was excited to tell her all about the exciting guidance she found in IRS Publication 17. When she got around to calling me, we agreed, this was one of those stories for the infamous “book” of financial aid rarities and oddities.

Got a great financial aid related story to tell? Tell us about it below.

Sample Verification Worksheets for 2012-2013

Earlier this week, the US Department of Education published sample Dependent and Independent Verification Worksheets.  Copies of the worksheets are available here:

http://www.ifap.ed.gov/eannouncements/020312SampleVerificationWorksheets1213.html

Schools are not required to use the sample worksheets.  Schools  may develop their own worksheets or they may choose not to use a worksheet at all but  rather, to collect the required documents, statements, certifications and  signatures through other means. In addition to the usual PI and household size, schools will be required to verify specific data elements from the student’s 2011 Federal Income Tax Transcript. SNAP and Child Support are also among the potentially verifiable items. To get a complete listing of the of the information that may need to be verified for applicants who complete the FAFSA for the 2012-2013 award year check out GEN 11-13 which was published way back in July of 2011.