Bridging the Gap: Verification/Mismatch Codes versus Tax Expert
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Transcript of Bridging the Gap: Verification/Mismatch Codes versus Tax Expert
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Lisanne MastersonDirector, Financial AidBlue Ridge Community College
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AGENDAWho Should File?
Verification Items on Tax Transcript
Other Items on Tax Transcript to Check
Issues
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ResourcesFAFSA Verification – IRS Tax Return
Transcript Matrix (IFAP.ed.gov)
IRS Publications17501 (Exemptions, Standard Deduction & Filing
Information)519 (Non-residents)
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Who Should File?Filing Status Age at end of 2013 Must file if gross
income at least…
Single Under 65 $10,000
65 or older $11,500
Head of Household Under 65 $12,500
65 or older $14,350
Married Filing Jointly Under 65 (both spouses)
$20,000
65 or older (one spouse)
$21,200
65 or older (both spouses)
$22,400
Married Filing Separately
Any age $3,900
Qualifying Widow(er) with Dependent Child
Under 65 $16,100
65 or older $17,300
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Who Should File?Self-Employed Persons
Required to file if net earnings (excluding church employee income) are $400 or more.
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Verification – Tax Return Transcript MatrixItem to Verify
FAFSA Q#
ISIR Field
2013 Tax Transcript Item
1040 Line
1040A Line
1040EZ Line
AGI 36 & 85 43 & 108
AGI Per Computer 37 21 4
Tax Paid 37 & 86 44 & 109
For 1040s:-Income Tax After Credits Per ComputerFor 1040As:-Total Tax Liability TP Figures Per ComputerFor 1040EZs:- Total Tax Liability TP Figures Per Computer
55 35 10
Ed Credits 44a & 93a 51 & 116
Education Credit Per Computer
49 31 NA
IRA Deductions
45b & 94b
58 & 123
KEOGH/SEP Contribution Deduction + IRA Deduction Per Computer
28 + 32 17 NA
Tax Exempt Interest Inc
45d & 94d
60 & 125
Tax-Exempt Interest 8b 8b NA
Untaxed IRA
45e & 94e 61 & 126
Total IRA Distribution – Taxable IRA Distribution
15a – 15b
11a – 11b
NA
Untaxed Pensions
45f & 94f 62 & 127
Total Pensions & Annuities – Taxable Pensions & Annuities Amount
16a – 16b
12a – 12b
NA
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Use Tax Transcript as Required Verification DocumentAdjusted Gross IncomeUS Income Tax PaidUntaxed Income
Untaxed pensionsUntaxed IRS distributionTax Exempt Interest IncomeEducation Credits
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What Else?Tax Form Used
Tax Filing Status
Wages
Business Income Details
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W-2 FormsIf you have them to verify
wages,you must also review
untaxed income items in box 12
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Tax Mismatch CommentsNot necessarily selected for Verification
Occurs when marital status, tax filing status, and wages do not match
MUST resolve
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Filing Status vs Marital Status• Single - Single• Married Filing Jointly
– Married– Separated/Divorced
• Married Filing Separately – Married– Separated/Divorced
• Head of Household– Married– Separated/Divorced
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Married & Filing SeparatelySeparated & Filing JointlyMarried & Filing Separately
Cannot use IRS Data RetrievalIRS Tax Transcripts for each and add the
respective line itemsSeparated & Filing Jointly
Use Tax Transcript to ‘separate’ out items for each based on W-2s, Business Income Statements etc.
Utilize institutional policy on how you ‘re-create’ a new Tax Return for joint items & tax paid.
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Head of Household• Unmarried or ‘considered unmarried’• Maintain over 50% costs of primary home• Must have a qualifying dependent that lived
with you more than 50% of the year
• Refer to IRS Publication 501 for details• CAN be Head of Household if you have a
nonresident alien spouse at any time during the year
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Considered UnmarriedOn last day of the year, you meet ALL of the
following:– File separate return– Paid 50+% costs for maintaining home– Spouse did not live in your home for the last
6 months of the year– Your home was main home for your
qualifying dependent– You must claim qualifying dependent as an
exemption*
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When You Have QuestionsConsidered Conflicting Information
34 CFR 668.54(a)(2)“If an institution has reason to believe that an
applicant’s FAFSA information is inaccurate, it must verify the accuracy of that information.”
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When You Have Questions• FSA Handbook, AVG – Discrepant Tax Data
– “We have already stated that financial aid administrators to 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 is required to file• 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.
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Resolving IssuesNot All Tax Preparers Are CorrectYOU are responsible for ensuring you resolve
conflicting dataRequest Amended Tax Return
Surprise….amended returns sometimes work in the student’s favor!
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Questions