Bridging the Gap: Verification/Mismatch Codes versus Tax Expert
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Transcript of Bridging the Gap: Verification/Mismatch Codes versus Tax Expert
Lisanne MastersonDirector, Financial AidBlue Ridge Community College
AGENDAWho Should File?
Verification Items on Tax Transcript
Other Items on Tax Transcript to Check
Issues
ResourcesFAFSA Verification – IRS Tax Return
Transcript Matrix (IFAP.ed.gov)
IRS Publications17501 (Exemptions, Standard Deduction & Filing
Information)519 (Non-residents)
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
Who Should File?Self-Employed Persons
Required to file if net earnings (excluding church employee income) are $400 or more.
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
Use Tax Transcript as Required Verification DocumentAdjusted Gross IncomeUS Income Tax PaidUntaxed Income
Untaxed pensionsUntaxed IRS distributionTax Exempt Interest IncomeEducation Credits
What Else?Tax Form Used
Tax Filing Status
Wages
Business Income Details
W-2 FormsIf you have them to verify
wages,you must also review
untaxed income items in box 12
Tax Mismatch CommentsNot necessarily selected for Verification
Occurs when marital status, tax filing status, and wages do not match
MUST resolve
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
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.
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
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*
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.”
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.
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!
Questions