Tax Transcripts and Verification Requirements

1. Tax Transcripts and Verification Requirements Tara Piantanida-Kelly, USA Funds

2. Program Integrity Questions and Answers Verification

3. Program Integrity Questions and Answers Verification

4. Program Integrity Questions and Answers Verification

5. Program Integrity Questions and Answers Verification

6. IRS.gov

7. Agenda • Required Verification Items. • Customized Verification Process. • Acceptable Documentation. • IRS Tax Transcripts. • Comparison of Tax Return and Tax Transcript Data.

8. 2013-2014 Required Verification Items 1 Non-income related items for certain applicants selected for verification: Was or will a federal income tax return be filed? Yes No Additional required items: • Adjusted gross income. • U.S tax paid. • Untaxed IRA distributions. • Untaxed pensions. • Education credits. • IRA deductions. • Tax-exempt interest income. Additional required item: • Income earned from work.

9. Agenda • Required Verification Items. • Customized Verification Process. • Acceptable Documentation. • IRS Tax Transcripts. • Comparison of Tax Return and Tax Transcript Data.

10. Customized Verification Process Verification Tracking Groups and Required Information 1-2 • Applicants selected for verification will be categorized into groups and identified by Verification Tracking Flags.

11. Customized Verification Process Summary of Tracking Group Requirements 3 Household size X X Number in college X X Child support paid X X X X SNAP (Food Stamps) X X X X X X High school completion Identity/educational purpose X X Income/tax data X X

12. Agenda • Required Verification Items. • Customized Verification Process. • Acceptable Documentation. • IRS Tax Transcripts. • Comparison of Tax Return and Tax Transcript Data.

13. Acceptable Documentation Non-Income Related Items Non-Tax Filers Tax Filers With Special Circumstances Tax Filers Without Special Circumstances 4-11

14. Acceptable Documentation Non-Income Related Items 4-5

15. Tax Data What FAAs are Required to Know 6 • Whether a person was required to file a tax return. • What the correct filing status for a person should be. • An individual cannot be claimed as an exemption by more than one person.

16. Acceptable Documentation Tax Filers Without Special Circumstances 7 • No documentation required if tax filer: • Used Data Retrieval Tool and did not alter data. • Tax transcript is required if tax filer: • Did not use DRT; • Used DRT but altered data. OR

17. Acceptable Documentation Tax Filers With Special Circumstances 7-8 Tax Filers Who Filed a Joint Return but Now Are Separated, Divorced, Widowed or Remarried AND • Tax transcript; • W-2 Form(s) if joint-filer no longer is married to individual on the return. • Only required for filer whose income was used to calculate the EFC. • If self-employed or W-2 form not available, school may accept a signed statement which includes: • Amount and source of income, and reason W-2 form is not available.

18. Acceptable Documentation 2012 W-2 Form 8-9 38805.19 3165.73 41180.90 1729.60 41180.90 597.12 E 2375.71 X 38805.19 2400.02

19. Acceptable Documentation Tax Filers With Special Circumstances 10 Tax Filers Granted a Tax Filing Extension by the IRS • Copy of IRS Form 4868 or approval of extension longer than six months; *An applicant’s U.S. taxes paid will come from Line 4 of the IRS Form 4868.

20. Acceptable Documentation Tax Filers With Special Circumstances 10 Tax Filers Granted a Tax Filing Extension by the IRS • Copy of IRS Form 4868 or approval of extension longer than six months; • Documentation of income: • Copy of W-2 Form(s); AND * An applicant’s AGI will come from Box 1 of the W-2 Form.

21. Acceptable Documentation Tax Filers With Special Circumstances 10 Tax Filers Granted a Tax Filing Extension by the IRS • Copy of IRS Form 4868 or approval of extension longer than six months; • Documentation of income: • Copy of W-2 Form(s); • If self-employed, a signed statement certifying AGI and tax paid. AND OR Schools have option of collecting tax data once return is filed. Income information must be re-verified when tax data is received.

22. Acceptable Documentation Individuals for Whom a Tax Transcript Cannot be Provided or Located 11

23. Acceptable Documentation Tax Filers With Special Circumstances • Amended Returns – Form 1040X:

24. Agenda • Required Verification Items. • Customized Verification Process. • Acceptable Documentation. • IRS Tax Transcripts. • Comparison of Tax Return and Tax Transcript Data.

25. IRS Tax Transcripts • Tax Return Transcript: • Provides most line items found on a tax return. • Does not reflect changes made after filing. • Tax Account Transcript: • Provides information on financial status. • Reflects changes made after filing. • 12

26. IRS Tax Transcripts Requesting Tax Transcripts 12, 35-36

27. Guidance Receipt of Unaltered Tax Data and a Tax Transcript 12 • When a school receives both unaltered tax data and a tax return transcript from an applicant: • All corrections must be made if any item on the tax transcript differs by $25 or more from the amount reported on the FAFSA.

28. Agenda • Required Verification Items. • Customized Verification Process. • Acceptable Documentation. • IRS Tax Transcripts. • Comparison of Tax Return and Tax Transcript Data.

29. Comparison of 2012 Tax Return and Tax Transcript Data • Hunter Davis: • IRS Form 1040EZ. • Tax transcript. • Elizabeth Moore: • IRS Form 1040A. • Tax transcript. • Ethan and Miranda James: • IRS Form 1040. • Tax transcript. 13-30

30. Comparison of 2012 Tax Return and Tax Transcript Data 13 23, 25

31. Comparison of 2012 Tax Return and Tax Transcript Data 13 23, 25

32. Comparison of 2012 Tax Return and Tax Transcript Data 13 23, 25

33. Challenges with Tax Transcripts Potential Conflicting Information – Wages Earned 25

34. Challenges with Tax Transcripts Potential Conflicting Information – Wages Earned 28

35. Challenges with Tax Transcripts Potential Conflicting Information – HSAs 26

36. Challenges with Tax Transcripts Potential Conflicting Information – Eligible to File a 1040A/EZ? 43

37. Challenges with Tax Transcripts Potential Conflicting Information – Eligible to File a 1040A/EZ? 47

38. Challenges with Tax Transcripts Taxable Scholarship and Fellowship Income 14 SCH 2,000

39. Challenges with Tax Transcripts Taxable Scholarship and Fellowship Income 16

40. Challenges with Tax Transcripts Rollovers • Form 1040: • Tax transcript: ROLLOVER 6,473.00 $6,473.00

41. Agenda • Required Verification Items. • Customized Verification Process. • Acceptable Documentation. • IRS Tax Transcripts. • Comparison of Tax Return and Tax Transcript Data.