Can you believe it? For many of you, the fall start is just beginning and before you realize the census date passed you by, the 2020-21 FAFSA year will be open for business.
The new award year will bring some major changes to the line items of locating tax information from either the IRS Transcript or the 1040 form. The most jarring change is where the Adjusted Gross Income (AGI) line will be located, moving all the way to Line 7 from Line 37 where it was located last year. There will also be some math involved with the taxes paid portion.
Below is a handy chart that lists where items will be located on the 2018 federal tax return.
|FAFSA Information||Acceptable Documentation|
|Adjusted Gross Income||2018 IRS Form 1040 Line 7|
|U.S. Income Tax Paid||2018 IRS Form 1040 Line 13 minus Line 46 of Schedule 2 (Form 1040)|
|Untaxed Portions of Individual Retirement Account (IRA) Distributions and Pensions||2018 IRS Form 1040 Lines 4a minus 4b. Note: Exclude rollovers.|
|IRA Deductions and Payments||2018 IRS Schedule 1 (Form 1040) Line 28 plus Line 32|
|Tax Exempt Interest Income||2018 IRS Form 1040 Line 2a|
|Education Credits||2018 IRS Schedule 3 (Form 1040) Line 50|
Back again is the requirement for Verification of Non-filing (VNF) from the IRS for those that did not file any sort of 2018 federal tax return. This is a good time to remind financial aid professionals that dependent students are not required to obtain VNF.
For those that extended their filing of taxes, this subset is under a whole set of different rules that need to be followed. Individuals are no longer required to submit IRS Form 4868 to the financial aid office, an Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The 4868 is still required by the IRS. However, they are required to submit the following items in the bullet points below to schools.
- Verification of Non-filing from the IRS dated on or after October 1, 2019;
- A copy of IRS Form W-2 for each source of 2018 employment income received or an equivalent document; and
- If self-employed, a signed statement certifying the amount of AGI and U.S. income tax paid for tax year 2018.
Verification tracking groups go unchanged from the 2019-20 year so there will be no additional training needed for you or your staff as it relates to those. The three active categories are once again V1, V4 and V5.
Always encourage your families to attempt to bring data in through the IRS retrieval system to lessen errors not only for initial awards that may go out but from your staff who may be verifying information on the back end. The key to any office achieving full compliance includes multiple ways to lessen the internal burden of having to complete verification of income data in the first place. Also staying on top of any key changes from year to year and sharing information that was listed here will bring about far less headaches come audit time.