# Presentation: 075153

## FAFSA – IRS Match

- Jeff Baker
- Federal Student Aid
- Dan Madzelan
- Office of Postsecondary Education
- Jeanne Saunders
- Federal Student Aid

***General Session***

## Today’s Topics

**Introductions**
**Background**
**Legal Status**
**Challenges**
**Implementation Ideas**
**What’s Next?**

## Introductions

**Jeff Baker**
**Federal Student Aid**
**jeff.baker@ed.gov**
**Dan Madzelan**
**Office of Postsecondary Education**
**dan.madzelan@ed.gov**
**Jeanne Saunders**
**Federal Student Aid**
**jeanne.saunders@ed.gov**

## “Uncertainty”

***“******Uncertainty”***

***“ ******Collaboration”***

## Background

## Why Is a FAFSA – IRS Match Important?

**THE RIGHT MONEY **
**TO THE RIGHT PEOPLE **
**AT THE RIGHT TIME **
**IN THE RIGHT WAY**
-  **More than $300 million per year in Pell Grant ****	****overawards**
** ****Included in President’s Management ****	****Agenda**
** ****Included in Department’s Strategic Plan**
** ****Savings in President’s Budget**

## Is a FAFSA – IRS Match a Big Deal?

**YES!!!**
**A match of FAFSA data with tax data from the IRS will be a major event in the history of student aid program administration**
**As significant as –**
**Creation of the Pell Grant Program**
**Common Form**
**Single Need Analysis Methodology**
**Unsubsidized Loans**
**Direct Loans**

## What is the FAFSA – IRS Match?

**A FAFSA – IRS Match would compare selected data from an applicant’s FAFSA with comparable data submitted by the taxpayer to the IRS:**
**  ****Adjusted Gross Income**
**  ****Taxes Paid**
**  ****Total Earnings from Employment**
**  ****Filing Status (e.g., single, married)**
**  ****Type of Tax Form (e.g., 1040, 1040A, ****	****1040EZ)**

## Legal Status

## Why Don’t We Already Have a FAFSA – IRS Match?

-  **1998 HEA Reauthorization**
**  ****Internal Revenue Code Section 6103 **
**  ****1998 IRS Restructuring and Reform ****	****Act**
**Confidentiality Studies **
**Treasury Department **
**Joint Committee on Taxation**

## Confidentiality Studies

**“****If (a business case can be made), section 6103 should be amended to permit disclosure of necessary items of information for income verification ... as contemplated by the HEA.” **
**“... ****if adopted, this provision should permit access by contractors, subject to (certain) limitations.”**
**“****The staff of the Joint Committee recommends that the present-law disclosure rules for using contractors for nontax administration purposes should not be expanded.”**

## What is the Legal Status of a FAFSA – IRS Match?

-  **HR 3613 – the “Student Aid Streamlined ****	****Disclosure Act of 2003”**
** ****Introduced November 21, 2003**
** ****House Ways and Means Subcommittee on ****	****Oversight**
** ****Invitation to Comment by January 23, 2004**
** ****Outlook**

## Challenges

## Challenges to Implementing a FAFSA – IRS Match?

-   **Calendar Issues**
**Tax Year and IRS Filing vs FAFSA Processing**
**Availability of Tax Data and Award Year **
**FAFSAs Received**

**Jan 1**

**April 15**
**IRS Filing Date**

**July/August**
**IRS Data Available**

## Change of Application Process Mindset

**FAFSA is a “two-step” process**
**	****File FAFSA as soon as ****	****possible**
**	****Update tax data as soon as ****	****returns are filed with IRS**** **

## Challenges to Implementing a FAFSA – IRS Match?

-   **Legal Authority Issues**
**Use of Contractors**
**Release of Actual Data vs. “Fact of Discrepancy” to schools**
**School’s Third Party Servicers**
**Informing Applicant/Taxpayer**

## Challenges to Implementing a FAFSA – IRS Match?

-   **Other Issues**
**SSN Mismatches **
**Late Tax Filers**
**Changes in Marital Status**
**Amended Returns**
**Non-filers**
**Applicants from Puerto Rico**
**Applicants with Foreign Tax Returns**
**Subsequent Corrections**
**Professional Judgment Changes**

## What is the School’s Role?

-    **Help inform applicants of change**
**  ****Communicate with applicant**
**  ****Ensure that updates are submitted**
-   **Request documentation**
**  ****Notify ED/FSA of resolution**
-    **Hold disbursement**
**  ****Collect/Report overpayment**

## What is the School’s Role?

**      ****Disbursements**
**Responsible Once Notified of Problem**
**No additional disbursements**
**Assist in recovering overpayments**
**Possible tolerance for upcoming disbursements**
**Verification**
** ****IRS Match ultimate verification**
** ****Modify regulations**
** ****Allow schools great flexibility**

## Implementation Ideas

## How Would a FAFSA – IRS Match Work?

- Start with demonstration match
- Six steps in the income verification process
**Step 1:**  Match FAFSA data with IRS data
**Step 2:**  Identify discrepancies
**Step 3:**  Determine impact of discrepancies
**Step 4:**  Notify parties of IRS match results
**Step 5:**  Perform resolution and hold or recover 		payments
**Step 6:**  Analyze process

## Implementation Challenges 

**Step 1:**  Match FAFSA data with IRS data
- Timing of availability of IRS data
- Selecting sample for matching in initial demonstration
- By Schools
- By Students
- Timing and frequency of matching
- Limits on use of contractors

## Implementation Challenges

**Step 2:**  Identify discrepancies
- Provide file of applicants to IRS
- “Material discrepancy” defined as greater of $100 or 1% of the item being matched

## Implementation Challenges

**Step 3:**  Determine impact of discrepancies
- What constitutes a discrepancy that must be resolved?
- Change in EFC
- Change in award amount

## Implementation Challenges

**Step 4:**  Notify parties of IRS match results
- How will students and parents be notified of discrepancies?
- How will schools be notified?
- Will ED notify parties only when there is a discrepancy?
- Release of data to Third Party Servicers prohibited
- Use of contractors in notification process

## Implementation Challenges

**Step 5:**  Perform Resolution: Hold 		Payments or Recover Overpayments
- Resolve possible discrepancies
- Marital status changes
- SSN mismatches
- Professional judgment changes
- How to minimize disruptions to aid delivery?

## Implementation Challenges

**Step 6:**  Analyze process
- Data
- School feedback

## What’s Next?

## What’s Next?

- Legislative process
- Continue to explore ways to minimize burden
- ED is developing different approaches to conducting FAFSA – IRS Match
- ED has started asking for feedback from the financial aid community about match implementation
- ED plans to involve the community throughout the match implementation process

## Comments, Suggestions, Offers

- We appreciate your feedback, comments, and suggestions.  Please e-mail your thoughts and ideas to:
- 	E-mail: _irsmatch__[@ed.gov](mailto:marilyn.leblanc@ed.gov)_