understanding tax returns in financial aid and the verification process
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Understanding Tax Returns in Financial Aid and the Verification process. F. Duane Quinn. Director of Training and Development American Student Assistance (ASA) [email protected] Forms: Non-filer. Gross under $ 7850 . and not claimed by another Claimed by parents, but gross less than $ 4700.

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f duane quinn

F. Duane Quinn

Director of Training and Development

American Student Assistance (ASA)

[email protected]

forms non filer
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
forms 1040ez
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
forms 1040ez5
Forms:1040EZ
  • Changes for 2002:
    • Remove Rate Reduction Credit Line 7
    • Earned Income Credit moves to line 8
    • Tax paid moves to 10
forms 1040a
Forms:1040A
  • Income under $50,000., wages, salary
  • Will take standard deduction
  • Can get IRA; Hope; Student loan interest deduction
forms 1040a7
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
forms 1040 must use to
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
new on 1040 for 2002
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
forms 1040 some schedules
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)
forms letter 1722 do
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
federal tax forms and verification
Federal Tax Forms and Verification
  • Federal tax returns form the backbone of the official verification process
federal verification
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”
documents to collect
Documents to Collect:
  • Federal Verification Worksheet or Institutional Form
  • Appropriate Tax Document
    • Original signature; copy; preparer stamp (copy) are all OK
  • “Other” if necessary
required verification items
Required Verification Items
  • Household Size
  • Number in College
  • Adjusted Gross Income
  • U.S. Income Tax Paid
  • Certain Untaxed Income / Benefits
certain untaxed income
“Certain” Untaxed Income
  • Untaxed Social Security Benefits
  • Child Support
  • IRA / Keogh Distributions
  • Foreign Income Exclusion
  • Earned Income Credit
  • Interest on Tax-free Bonds
required verification items from tax returns
Required Verification Itemsfrom Tax Returns
  • Adjusted Gross Income (AGI)
  • U.S. Income Tax Paid
  • Some Untaxed Income / Benefits
remember
Remember!!!!!
  • Other required verification Items not found on IRS forms:
    • Child Support Rec’d
    • Welfare
    • Household size not always = exemptions
    • Number in college
verifying child support
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
verifying household size
Verifying Household Size
  • Signed Verification Worksheet
  • Institutional Form
  • Signed Statement with names; ages; relationship to student
household size cont d
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
verifying number in college
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
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