Extension Form for Irs - PowerPoint

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					   National Association of Student
    Financial Aid Administrators




The following is a presentation
 prepared for NASFAA’s 2007
Conference in Washington, DC
        July 8-11, 2007
IRS Individual Tax Returns
      & The FAFSA


    Don Zackary, CPA
  Dallas Baptist University
              Student Financial Aid Regulation
           Part 668.16 - Student Assistance General Provisions
• §668.16(f) of the General Provisions regulations states that an institution has
  the administrative capability to administer the Title IV programs if, among
  other things, it…
• “Develops and applies an adequate system to identify and resolve discrepancies
  in the information that the student’s application for financial aid under the Title
  IV, HEA programs. In determining whether the institution’s system is
  adequate, the Secretary considers whether the institution obtains and reviews-
    – (1)All student aid applications, need analysis documents, Statements of Educational
      Purpose, Statements of Registration Status, and eligibility notification documents
      presented by or on behalf of each applicant;
    – (2)Any documents, including any copies of State and Federal income tax returns,
      that are normally collected by the institution to verify information received form
      the student or other sources; and
    – (3)Any other information available to the institution regarding student’s citizenship,
      previous educational experience, documentation of the student’s social security
      number of other factors relating to the student’s eligibility for funds under the Title
      IV, HEA Programs.
         2005-06: Federal Student Aid Handbook
                      Application and Verification Guide
• Chapter 5 – Discrepant tax data
    – We have already stated that financial aid administrators do not need to be tax
      experts, yet there are some issues that even a layperson with basic tax law
      information can evaluate. Because conflicting data often involve such information,
      FAAs must have a fundamental understanding of relevant tax issues that can
      considerably affect the need analysis. You are obligated to know: whether a person
      was required to file a tax return, what the correct filing status for a person should be,
      and that an individual cannot be claimed as an exemption by more than one person.
    – Publication 17 is a useful resource for aid administrators. You can view it on the
      Web at www.irs.gov or you can call the IRS at 1.800.829.3676 to order a copy.
      Other tax issues that it addresses: the filing requirements-i.e., who is required to file
      a return-are on pages 7 and 8; and instructions on which form a person should file
      are on pages 9-11.

    1.    FAAs are not tax experts.             3.   Know filing requirements and
                                                     status.
    2.    Fundamental understanding
          of tax issues.                        4.   Reference Publication 17.
       Conflicts in Taxable Income
• Handbook states FAA should be able to determine
  if applicant required to file tax return, but FAA not
  expected to be tax law expert
   – §668.56(a)(5)(vii) says first two pages of 1040 are sufficient
     for verification (i.e., W2s and schedules not required)
   – Must resolve:
      • Married filing separately; both claimed “Head of Household”
      • Student claimed self as exemption, but so did parent
      • Net assets = $0 but income generated from assets on return
   – Not required to resolve
      • Claimed multiple or conflicting credits
      • IRS Form W-2, Box 14 issues
  Types of Tax Returns That May Be Used
              for Verification
• 1040 – U.S. Individual Income Tax Return
• 1040A – U.S. Individual Income Tax Return
• 1040EZ – Income Tax Return for Single and Joint Filers with
            No Dependents
• Tax Summary from IRS          Must have signatures of:
                                  1 - Tax payer
                                OR
                                  2 - Tax preparer
                                  (SSN/PTIN)
Box 12A-D - Codes
D,E, F, G, H & S.


Box 14 - Not required
to resolve
Eligible to file a 1040A or 1040EZ


                 • Must file a 1040 if any
                   of the following line
                   items are completed.
                 • Income
                    – 10, 11, 12, 14, 17, 18, 21
                 • Adjustments
                    – 24, 28, 29, 30, 31, 32,
                      33, 34
             Filing Status
• Single
• Married Filing Jointly
• Married Filing Separately
• Head of Household
• Qualifying Widow(er) with Dependent
  Child
• See IRS Publication 17, for details.
 Guide of Income Requirements for
        Filing a Tax Return
• Income Level                         • Non Citizen (Form 1040NR)
   – Single, Dependant                    – File Form 1040NR if any of
        • Earned income $5,150 OR           the following conditions
        • Unearned income $850              applies to you:
   –   Single, Independant $8,450             • You were a nonresident
   –   Married Joint $16,900                     alien engaged in a trade or
   –   Married Separate $3,300                   business.
   –   HOH, one child $13,950                 • You received income from
                                                 U.S. sources that is
   –   Additional Exemptions: $3,100
                                                 reported on lines 74a
• Business Income                                through 83.
   –   Reported on 1040
   –   Schedule C
   –   Partnership Income
   –   S - Corporations
                   Estimated vs. Actual
1 - Filing Extensions
         If any of the persons required to report information on the FAFSA will file but
  hadn’t filed a tax return at the time of application, they would have to use an estimated
  AGI on the FAFSA. At the time of verification, the necessary tax returns should have
  been filed and must be used for verification. If a return hasn’t been filed by then and a
  filing extension was granted by the IRS, the school may accept as alternative
  documentation copies of the W2 forms, and, as proof that the IRS has granted a filing
  extension, either a copy of IRS Form 4868 – Application for Automatic Extension of
  Time to File U.S. Individual Income Tax Return (automatically grants the taxpayer a six-
  month extension beyond the April 15 deadline).
         In addition to supplying the above documentation, the student must submit a copy
  of the tax returns when filed. When you receive the completed tax returns, you may use
  them to re-verify the required data. A student who fails to submit a copy of the filed tax
  return or alternative documents before the documentation deadline is ineligible for FSA
  funds and is required to repay any aid disbursed. Regardless of whether the student
  repays the aid, your school is liable for the interim disbursement.
2 – Completing the Process
         Unless receiving only an unsubsidized or PLUS loan, a student selected
  for verification must complete it, and you have the authority to withhold
  disbursement of any FSA funds until she does. Adopting this policy
  substantially reduces the incidence of overpayments. You can, however, make
  an interim disbursement before verification is complete.
3 – Interim Disbursements
         Your school is liable for an interim disbursement if verification shows
  the student received an overpayment or if he fails to complete verification.
   – Pell Grants, Perkins, and FSEOG – only one disbursement
   – FCWS – can employ up to 60 consecutive days
   – Stafford – can be guaranteed but not disbursed
Filing Status
         August 20, 2004

         Dear Financial Aid Student,

         Federal regulations require that all conflicting information provided to us, must be
         resolved. You indicated on your FAFSA that you have been married since January of
         1998. On the Verification Worksheet for 2004-2005 you stated that you and your spouse
         live in the same household. Therefore, married couples are usually required to file a tax
         return status as married filing jointly or married filing separately. According to the
         document you provided, you and your spouse both filed as Head of Household.

         In order to resolve this conflict of filing status we need one of the following items of
         documentation:

            Amended 2003 tax return (1040X) OR
            Letter from the IRS stating that your current filing statuses are correct. You may call
             the Law Department of the IRS at 1(800)829-1040. OR
            Letter from your tax preparer stating the reasons why you filed the statuses indicated
             and upon what IRS regulations their decision was based.

         Because of federal regulations we cannot continue processing your application for
         Financial Aid until the proper documentation has been received. If you have questions
         please contact our office at (214)333-5363

         Sincerely,




         Donald G. Zackary
Did Not File
       September 3, 2004

       Dear Financial Aid Student,

       According to the paper work that you submitted in you application for Financial Aid you
       indicated that you did not file a 2003 tax return. The amount you indicate as income
       would require you to file a tax return.

       In order to resolve this conflict of filing status we need one of the following items of
       documentation:

          2003 tax return OR
          Letter from the IRS stating that your are not required to file a 2003 tax return. You
           may call the Law Department of the IRS at 1(800)829-1040. OR
          Letter from you or a tax specialist stating the reasons why you are not required to file
           a 2003 tax return and the regulations upon which decision was based.

       Because of federal regulations we cannot continue processing your application for
       Financial Aid until the proper documentation has been received. If you have questions
       please contact our office at (214)333-5363

       Sincerely,




       Donald G. Zackary
Verify Assets
        August 31, 2004

        Dear Financial Aid Student,

        According to the information that was submitted to FAFSA, your parents claim to have
        zero assets. Line 82 of the FAFSA asks for the net worth of your parents’ investments
        including real estate, but not including your home. And Line 83 of the FAFSA asks for
        the net worth of your parents’ current business and/or investment farms.

        This information appears to be inconsistent with the information provided on Lines
        8A,13A,14,17, and 18 of their 2003 tax return. Therefore, please verify that the
        information submitted on the FAFSA is correct, or that it should be changed, by
        providing us with written documentation by your parents or their tax preparer, stating
        their total assets applicable in the above mentioned categories for 2003.

        Because of federal regulations that require verification of your current financial status,
        we cannot continue processing your application for Financial Aid until the proper
        documentation has been received. If you have questions please contact our office at
        (214)333-5363

        Sincerely,




        Donald G. Zackary
Low Income

      July 9, 2004

      Dear Financial Aid Student,

      We received your Low Income Statement for 2004-2005, however we still cannot
      process your application for Financial Aid. It is necessary that you provide us with
      a numerical estimate of the amount of support that you received in 2003. Until we
      have reasonable annual amount of the support and bills that were paid on your
      behalf, as you have indicated on the Low Income Statement, we cannot process
      your application for Financial Aid.

      Please see the enclosed Low Income Statement for 2004-2005.

      Feel free to contact our office if you have any questions regarding this issue.

      Thank you,




      Emily Shaffer
      Financial Aid Coordinator
      Office of Financial Aid
      Dallas Baptist University
  Why is it important to resolve
  conflicting tax information?
• Because it ensures that the right students
  (eligible students) receive the right (correct)
  amount of aid.
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