This guidance is specific to the 2024-25 award year and later. For 2023-24* award year guidance see AskRegs Q&A, Is It Conflicting Information If AGI and Income Earned From Work Are Significantly Different, Even When the IRS Data Retrieval Tool Is Used?
Not necessarily. A tax filer can have significant income from sources other than from work (e.g., rental income, investment income).
Starting with the 2024-25 award year, income earned from work (earned income) is a required verification item for both applicants who are tax filers and for applicants who are nontax filers. For applicants who are tax filers, earned income (from IRS Form 1040, Line 1z plus Schedule 1, Line 3 and Line 6) is used to determine the total earned income for purposes of calculating the payroll tax allowance and employment expense allowance used in the student aid index (SAI) formula.
If federal tax information (FTI) is retrieved via the FUTURE Act Direct Data Exchange (FA-DDX) and is unchanged, it is considered verified information. However, if the FAFSA contributor could not transfer FTI, information must be manually entered. In that scenario, it is possible that an applicant could have entered incorrect information. Your institution always has the option to select a student or individual data elements for verification. Please see 34 CFR 668.54(a)(2).
Note that if an independent student (and spouse, if applicable) or the parent(s) of a dependent student is not required to file a federal income tax return, they are automatically assigned an SAI of negative 1500; earned income is not used in the SAI calculation.
Under 668.16(f), the school also is required to resolve conflicting information whenever the school receives documentation that shows there is a difference in the earned income fields between the FAFSA and the tax return or tax transcript. The school should request W-2 forms and/or a signed statement listing the income and sources of that income to be able to resolve the conflicting information and to determine if an update to each parent's income earned from work is necessary. See also AskRegs Knowledgebase Q&A, Do We Need W-2s For Verification Groups V1 and V5 If Total Earned Income Differs Between the Tax Transcript and the FAFSA?
NASFAA's Compiled Title IV Regulations may be found under Tools & Resources on the NASFAA website.
Student Aid Reference Desk: For additional information, try the Student Aid Reference Desk. It is a central hub of all the important financial aid resources you need with direct links to legislation, regulation, Dear Colleague Letters, and other ED and NASFAA references. It is updated on a rolling basis with the latest news and changes. Search Verification.
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