FSA: More Verification Fixes on the Horizon

December 6, 2018

By MorraLee Keller, Director of Technical Assistance, and Jack Porter, Advocacy Associate

James Manning, acting chief operating officer for the office of Federal Student Aid, gives remarks at the 2018 FSA Training Conference. 

Last week, FSA announced two changes aimed at reducing the burden that FAFSA verification places on students applying for financial aid. 

Change No. 1: Students flagged for verification will be permitted to submit tax returns to confirm their income status, as opposed to tax transcripts. 

Change No. 2: Financial aid administrators will soon have the authority to accept “signed statements” from applicants who do not file tax returns, thereby removing the necessity for students to obtain a Verification of Non-Filing Letter from the Internal Revenue Service (IRS). This change will likely take effect immediately after FSA issues the new guidance. Students still completing verification for the 2018-19 academic year as well as those in verification for the 2019-20 academic year will be able to take advantage of this change. 

ED indicated it would disseminate official guidance on these changes “very soon.” 

You can watch a video recording of the announcement from the recent FSA conference in Atlanta (starting at the 7:30 timestamp). 

These two policy advancements – both of which were recommended in NCAN’s new verification white paper – come on the heels of the Faster Access to Federal Student Aid (FAFSA) Act’s introduction earlier this month. 

If approved, the FAFSA Act would allow the U.S. Department of Education to obtain tax data that are crucial to calculating students’ financial need from the U.S. Department of the Treasury. This enhanced inter-agency data-sharing would, in theory, decrease the number of students flagged for verification. It would also simplify the application process for filers currently unable to use the IRS Data Retrieval Tool.

The fate of the FAFSA Act in this congressional session will be decided before the end of the calendar year. The bill will likely be reintroduced by the next Congress if it does not pass this time around. 

NCAN will be sure to relay all updates on these topics to members as they become available.   

Tax Form Revisions Will Lead to Required FAFSA Updates 

The Tax Cuts and Jobs Act of 2017 – the sweeping tax legislation signed into law by President Trump in December 2017 – is bringing substantial changes to the tax filing process.

These changes will affect the FAFSA and perhaps the determination for the Simplified Needs Test (SNT) and the auto zero EFC calculations. This law eliminates the 1040A and 1040EZ forms. All tax filers will file a revised 1040 tax form. The number of questions on the 1040 has been reduced, with many of the questions moved to six newly developed schedules, which are numeric, numbered 1 through 6. 

Misty Parkinson, director of application products and customer service for Federal Student Aid, addressed the potential FAFSA updates needed in two different sessions at the recent FSA conference. All of the updates shared by Misty are anticipated at this point. 

ED and the IRS are in discussion to seek final resolution of the issues related to the FAFSA and the new tax law. Below are changes and the potential adjustments for the 2020-21 FAFSA form:

Change: Number of exemptions numeric question/answer are no longer on the 2018 form.

  • Resolution Needed: To keep or remove the number of exemptions question from the FAFSA. No anticipated resolution was shared.

Change: Form 1040A and 1040EZ have been eliminated.

  • Anticipated Resolution: Eliminate the 1040A/EZ answer option for the question: What type of tax form did or will you file?
  • Additional Implications: When reviewing the criteria to qualify for the Simplified Needs Test or the auto zero EFC calculation, one of the qualifiers is being eligible to file a 1040A or EZ.
  • Anticipated Resolution: If the tax filer was not required to file the new Schedule 1, that may be substituted as one of the qualifiers for SNT or auto zero.

Change: Untaxed portion of annuities/pensions will be combined to one line on the new 1040 form.                                              

  • Anticipated Resolution: The annuities/pensions questions will be combined on the FAFSA and therefore reduce the total number of questions on the FAFSA.

Change: IRA deductions & payments and education credits moved to a schedule.                          

  • Anticipated Resolution: The IRS DRT will have the capability to pull these required fields from the appropriate schedules.

NCAN applauds FSA and the IRS’ early efforts to address the needed changes for the next FAFSA cycle. NCAN will continue to communicate with FSA to understand when final resolutions for these items have been reached and share the information with our members.

(Image via FSA: http://www.webcastregister.live/2018fsatc_records/viewv2/1813/)

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