Verification-IRS Data Retrieval & Tax Transcripts for

2012-2013©

Jim BriggsThe Tax Detective

Review of Updated Verification Rules

Review of IRS Data Retrieval Process

Review of IRS Tax Transcripts

Q&A

Session Outline

IRS Publication 17 – Your Federal Income Tax

IRS Publication 970 – Tax Benefits for Education

IRS Publication 3 – Armed Forces Tax Guide

IRS Publications

Changes outlined in DCL Gen 11-13 – 2011◦ 30% verification cap eliminated◦ AGI, Taxes Paid, certain untaxed income -

considered verified through IRS data retrieval process if no changes made

◦ All families who qualify are encouraged to use IRS data retrieval

◦ Ineligible families and those that refuse are required to provide: IRS Tax Return Transcripts and/or Copies of Foreign Tax Returns

2012-13 VerificationRequirements

Filed a Foreign tax return

Married filing separately

Change in marital status after 12/31/XX

Ineligible for IRS Data Retrieval

Primary method used by families to verify◦ AGI,◦ Tax-Exempt Interest Income◦ Taxes Paid,◦ Education/First Time Home Buyer Credits◦ IRA/Pension - Untaxed Income

IRS Data Retrieval - 1

Families not eligible or did not use IRS Data Retrieval & selected for verification must submit:◦ IRS Tax Return Transcript and/or◦ Copy of foreign tax return and/or◦ In “rare” cases a paper copy of US tax return

IRS Data Retrieval - 2

Must list first name shown on IRS tax return filed

Must use EXACT address shown on corresponding tax return

Dept of ED and IRS working to make the process more “user friendly”

IRS Data Retrieval -3

Does Not import “earned income”

Automatically adds 15a-15b and 16a-16b as untaxed income

Does not add line 25

IRS Data Retrieval – 4

Currently the IRS data on a tax return may only be imported into ONE FAFSA per award year. This causes issues when:

◦ Parent of dependent student is also a student

◦ Student has siblings who are also filing a FAFSA

Multiple IRSDT’s?

02 – The only code that is valid for verification

Correcting rollovers on lines 15 or 16 will trigger a change from 02 and require a tax transcript

Adding “earned income” data will not change the code from 02.

IRS Data Retrieval Codes

Provided by the IRS free of charge

Available for processing by IRS:◦ 2-3 weeks after filing for E-filed returns◦ 6-8 weeks after filing for paper filed returns

Transcript should arrive within 5-10 business days after it is available for processing

IRS Tax Transcripts

Tax Return Transcript – reports what was on ORIGINAL tax return (online & phone)

Tax Account Transcript – reports changed data from 1040X or additional 1040 and SOME of the original data. (online & phone)

Record of Account – reports all of the original and changed data (4506-T-EZ or 4506)

Types of tax transcripts

How to obtain a tax transcript:

◦ Online – PREFERRED

◦ Phone – Acceptable

◦ Mail – Acceptable but SLOW

◦ IRS Office Walk-In – Frowned Upon

Ways to obtain Transcripts

Parent student E-filed – but transcript NOT available. Possible cause:

Federal Tax returns filed before the filing deadline with an unpaid balance due are not “processed” by the IRS until the earlier of:

◦ the filing deadline has passed (4-17-2012) or

◦ the tax has been paid

Unpaid Taxes

IRS URL for Transcripts:◦ https://sa2.www4.irs.gov/irfof-tra/start.do

Must provide:◦ SSN or ITIN◦ Date of Birth◦ EXACT Street Address as used on tax return◦ Postal Zip Code

IRS Transcript URL

How to obtain IRS Transcripts

Online Tax Transcript

IRS Form 4506-T-EZLines 1-4

4506-T-EZLines 5-6

4506-TLines 1-5

4506-TLines 6-8

4506-TLine 9

Tax Transcript Decoder - 1

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Tax Transcript Decoder – 3

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When a 1040X is filed the family will need to provide:◦ Tax Return Transcript &◦ Tax Account Transcript

◦ OR

◦ Record of Account – available only with filing of 4506-T (up to 30 days to receive)

Amended Tax Return

NASFAA – Using Federal Tax Returns in Needs Analysis:◦ Good explanation of 2011 Tax forms, 2012-13

Verification procedures & Tax Return Transcript Decoder

USAFUNDS – Excellent explanation of 2012-13 Verification, 2011 Tax forms and Tax Return Transcript Decoder.

Resources

2012-13 is a transition year

Dept of ED, IRS, Schools all working together to streamline and simplify verification.

2013-14 should be much more automated and most of the wrinkles should have been ironed out.

Be Calm

NCASFAA and Jim Briggs thank you for your participation.

Questions?