** Client Confidential ** Understanding Tax Returns in Financial Aid and the Verification process.
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** Client Confidential ** Understanding Tax Returns in Financial Aid and the Verification process
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Transcript of ** Client Confidential ** Understanding Tax Returns in Financial Aid and the Verification process.
** Client Confidential **
Understanding Tax Returns in Financial Aid and the
Verification process
** Client Confidential **
F. Duane Quinn
Director of Training and Development
American Student Assistance (ASA)
** Client Confidential **
Forms: Non-filer
Gross under $7850. and not claimed by another
Claimed by parents, but gross less than $4700.
Not owed a refund of withholding
Unearned income < $700
** Client Confidential **
Forms: 1040EZ
Single or married (filing jointly); no dependents
Income only from wages, salaries, tips and < $50,000
taxable interest income <$400.
Will claim standard deduction
** Client Confidential **
Forms: 1040EZ
Changes for 2002:
– Remove Rate Reduction Credit Line 7
– Earned Income Credit moves to line 8
– Tax paid moves to 10
** Client Confidential **
Forms: 1040A
Income under $50,000., wages, salary
Will take standard deduction
Can get IRA; Hope; Student loan interest
deduction
** Client Confidential **
Forms: 1040A Changes for 2002:
– Removal of Rate Reduction Credit line 30
– Tax paid becomes line 36
– EIC moves to 41
– Additional Child Tax credit moves to 42
** Client Confidential **
Forms: 1040 - Must use to…..
Report non taxable interest, dividends, capital gains
Claim Itemized deductions Claim deductions for: moving expenses,
payment of alimony, SEP Parents reporting child’s Interest & Div... Business; Rental; Trust; Partnership
** Client Confidential **
New on 1040 for 2002 New Off-sets to Total Income (Educator and Tuit.
And Fee) AGI moves to line 35
Eliminate Rate Reduction Credit line 47
Taxes Paid moves to line 55
Earned Income Credit moves to 64
Additional Child tax credit moves to 66
** Client Confidential **
Forms:1040 Some Schedules
“A” : Itemized Deductions
“B” : Interest and Dividend Income
“C” or “C-EZ” : Business Profit / Loss
“D” Capitol Gains and Losses
“E” : Supplemental Income (Rental,
Partnerships, Trusts)
** Client Confidential **
Forms: Letter 1722 (DO) Transcript of Tax Information
Request and receive “on the spot” with proper identification.
Acceptable for verification
RTFTP -issued when 1722 not available
Letter 2951C; 8055C; 8059C
** Client Confidential **
Federal Tax Forms and Verification
Federal tax returns form the backbone of the official verification process
** Client Confidential **
Federal Verification Applications with Conflicting Information
– Must resolve all; even if not selected
Verify all selected; but not in excess of 30% of “applicants”– School policy on selection of students to be
verified– School policy on definition of “applicants”
** Client Confidential **
Documents to Collect: Federal Verification Worksheet or
Institutional Form
Appropriate Tax Document– Original signature; copy; preparer stamp
(copy) are all OK
“Other” if necessary
** Client Confidential **
Required Verification Items
Household Size
Number in College
Adjusted Gross Income
U.S. Income Tax Paid
Certain Untaxed Income / Benefits
** Client Confidential **
“Certain” Untaxed Income
Untaxed Social Security Benefits
Child Support
IRA / Keogh Distributions
Foreign Income Exclusion
Earned Income Credit
Interest on Tax-free Bonds
** Client Confidential **
Required Verification Itemsfrom Tax Returns
Adjusted Gross Income (AGI)
U.S. Income Tax Paid
Some Untaxed Income / Benefits
** Client Confidential **
Taxable Income 1040 EZ IRS 1040 A IRS 1040 Telefile
Adjusted Gross Income Line 4 Line 21 Line 35 Line I
U. S. Tax Paid Line 10 Line 36 Line 64 Line K (2)
Untaxed IncomeEarned Income Credit Line 8 Line 41 Line 64 Line LAdd. Child Tax Credit NA Line 42 Line 66 NAUntax. SS Benefits NA Line 14a - 14b Line 20a - 20b NATax Exempt Interest NA Line 8b Line 8b NAUntaxed IRA Dist. NA Line 17 Line 24 + 31 NAUntaxed Pen. and Ann. NA Line 12a -12b Line 15a - 15b NAIRA / Keough Deduction NA Line 17 Line 24 = 31 NAForeign Income Exclusion NA NA Line 21 NACr. Tax on Special Fuels NA NA Line21 NA
Verification Items from Tax Returns
** Client Confidential **
Remember!!!!!
Other required verification Items not found on IRS forms:– Child Support Rec’d– Welfare– Household size not
always = exemptions– Number in college
** Client Confidential **
Verifying Child Support: Signed Verification Worksheet
– or Statement signed by Parent and Student
– or Copy of Divorce Decree / Canceled
Checks / Statement of non-custodial- or
Not required to verify if same amount as was verified last year
** Client Confidential **
Verifying Household Size
Signed Verification Worksheet
Institutional Form
Signed Statement with names; ages; relationship to student
** Client Confidential **
Household Size (Cont’d)
Not need to verify if:– SAR / ISIR within 90 days of signature
– same as verified last year
– Married- 3 / Single - 2
– Independent single with HH of 1 or married -2
** Client Confidential **
Verifying Number in College
Signed Verification Worksheet Signed Institutional Form Signed Statement with names; ages;
institutions
Not Required if: SAR w/in 90 days of signature; Enrolled at your school; number in college is 1
