Additional information about Verification for Non-Filers
For non-tax filers you must receive a W-2 form for each source of employment income. You must also get a signed statement giving the sources and amounts of the person’s income earned from work not on W-2s and certifying that the person has not filed and is not required to file a tax return. For residents of the Freely Associated States (the Republic of the Marshall Islands, the Republic of Palau, or the Federated States of Micronesia), a copy of the wage and tax statement from each employer and a signed statement identifying all of the person’s income and taxes for the year is acceptable. Persons from a U.S. territory or commonwealth or a foreign country who are not required to file a tax return can provide the signed statement certifying their income and taxes paid.
You must also require the person to submit a “Verification of Non-filing Letter” from the IRS (filers of foreign returns would submit a comparable document) dated on or after October 1, 2016, attesting that she did not file a 2015 IRS income tax return. She can obtain this by submitting IRS Form 4506-T and checking box 7. Note that verification of non-filing is not an indication that the person is not required to file a return, just that she did not file one. See Chapter 5 if a person whose financial information was on the FAFSA did not file a tax return when it appears she was required to do so, and see Question DOC-Q29, on the webpage given in the page 79 margin, about non-tax filers who lack any identifying number (e.g., SSN) needed to get a confirmation of non-filing from the IRS.
The requirement is new for the verification process and requires the appropriate documentation from the IRS. There are literally millions of non-filers (both students and parents) each year. The IRS had limited avenues for people to retrieve the verification of non-filing. The burden has been tremendous on our families as well as the aid institutions attempting to complete verification. NCAN applauds NASFAA for its efforts in seeking relief for this requirement. Our hope for the future is that this requirement does not result in any significant changes in the information reported, has little to no effect on expected family contributions and will be eliminated eventually.
Our colleagues at NASFAA sent a letter to the Education Department seeking some relief for this requirement. On Thursday, Feb. 23, Federal Student Aid released an Electronic Announcement that permits some relief (additional options) for the allowable documentation to complete verification. Shared below is the information provided in the Electronic Announcement.
Attached to this Electronic Announcement is a chart that shows the methods by which a tax-filer can request and receive verification documents from the IRS. The chart provides information about the verification documents that can be requested from the IRS, the IRS document or response that will result from each request, where the response will be sent, and an estimate of the time for the IRS to respond to the request.
The attached chart identifies four types of documents that are used for FAFSA verification:
- Tax Return Transcript
- Record of Account
As a reminder a Tax Return Transcript and the Record of Account can be used to verify the following income and tax information of IRS tax return filers:
- Adjusted Gross Income (AGI)
- Taxes paid
- Education credits
- IRA deductions
- Tax-exempt interest income
- Untaxed IRA distributions, and
- Untaxed pension
- Tax Account Transcript – The Tax Account Transcript provides “basic data” from the tax return, as well as amended tax return data, but it may not include all of the information that is on a Tax Return Transcript or a Record of Account. Thus, for tax filers who filed an amended tax return, one way that verification may be completed is with both a Tax Return Transcript and a Tax Account Transcript. It is also possible to complete verification for such a tax filer with only their Record of Account. However, the Record of Account may be complicated to read and difficult to interpret.
- Wage & Income Transcript (IRS Form W-2 documentation) – A Wage & Income Transcript may need to be requested if a nontax filer is unable to provide copies of IRS Form W-2. IRS Form W-2 or Wage & Income Transcripts can be used to verify income earned from work for nontax filers. Nontax filers selected for verification must also provide supporting documentation for verification of non-filing.
Verification of Non-filing
IRS documents that clearly indicate that the IRS does not have a tax return record on file for the tax year are acceptable for verification of non-filing. This includes a Tax Return Transcript or a Tax Account Transcript that includes a message such as “no record of return filed” or “no transcript on file”. See below for more information on “messaging”.
Some IRS documents may state that the request cannot be completed because there is a tax return on file. In these cases, the individual should request a Tax Return Transcript.
As previously stated, a Tax Return Transcript and a Tax Account Transcript that includes a message such as “no record of return filed” or “no transcript on file” is acceptable documentation for verification of non-filing because these IRS documents clearly indicate that the IRS does not have a tax return record for the requesting individual for the relevant tax year.
Important: Some IRS documents, including tax transcripts, may include a message that indicates that the request “could not be processed”, or the “request could not be honored”. Any IRS document with such unclear messages is not acceptable documentation for verification of non-filing. The individual should follow the instructions provided by the IRS to obtain further documentation that provides a clear and precise message.
IRS Form 13873
In some instances, instead of providing the requested document, the IRS may provide the tax-filer an IRS Form 13873. There are several versions of IRS Form 13873 (e.g. 13873-T, 13873-V, etc.). Any version of IRS Form 13873 that clearly states that the form is provided to the individual as verification of non-filing or that states that the IRS has no record of a tax return is acceptable documentation of non-filing.
IRS Form 13873 may also be provided by the IRS for a number of other reasons and may contain messaging that is nonspecific to the IRS document request. We have been told by the IRS that Form 13873 may also be used to communicate to the individual that the IRS is unable to fulfill the document request because the request itself was incomplete or included inaccurate information. In these cases, the individual should follow the instructions provided by the IRS to obtain further documentation that includes a clear and precise message.
Institutions should thoroughly review any IRS Form 13873 to ensure that the messaging and information provides a clear response to the documentation request and satisfies documentation requirements for verification.
Although this guidance is not limited to just 2017-2018, for additional information, institutions should review the April 1, 2016 Federal Register notice and Dear Colleague Letter GEN-16-07, posted on April 5, 2016, which provides the 2017-2018 information that must be verified for students selected for verification and acceptable documentation for these requirements. Institutions should also review the January 12, 2017 Electronic Announcement that provides a guide for interpreting the IRS Tax Transcript.
If you have any questions about the attached chart, please contact our Research and Customer Care Center staff. Staffs are available Monday through Friday between the hours of 9:00 AM and 5:00 PM (Eastern Time) at 1-800-433-7327. After hours calls will be accepted by an automated voice response system. Callers leaving their names and phone numbers will receive a return call the next business day. Alternatively, you may email the Care Center at email@example.com.
February 23, 2017 Electronic Announcement: Verification – IRS Documentation Requests, Uses, and Messaging