FAFSA, FAFSA Read all about it! The IRS is here to help?
By Joe Messinger, CFP®
February 12, 2016
Since this piece was written in February 2016, the FAFSA deadlines have changed. The FAFSA will now go live on October 1, 2016 for the first time. The IRS Data Retrieval Tool will be available for you to use if you qualify to pull up your “prior-prior” tax returns. Click here for the latest information.
The 2016-2017 IRS Data Retrieval Tool is up and running. The IRS DRT became available on February 7. What is it and why is it such a useful tool?
For the families of rising college Freshmen, hopefully you have already filed your provisional FAFSA. February 1st is the most common priority filing deadline. When you filed your provisional FAFSA, you should have indicated “Will File Taxes” if you had not completed your federal tax return yet. After you file your taxes, you are required to go back into the system and update your FAFSA with your actual tax return information.
If you are eligible, we strongly recommend utilizing the IRS DRT. (An important point…wait at least 3 weeks after filing your taxes electronically before trying to utilize the IRS DRT to ensure that your tax information is available in their system.) The DRT ensures accuracy of all the numbers pulled directly from the IRS and helps you avoid any guess work or mistakes. Be sure to review each tab of the FAFSA filing.
Families often ask how they know that you are telling the truth. Well, about 1 in 3 FAFSAs submitted go through a “verification” process–kind of like a mini-audit. So, in the course of your college career, it is actually very likely that you will be asked to go through this process. Verification is typically not very difficult, and they only need a few financial statements to verify assets and income. You will be selected if something looks fishy or if your “provisional” submission was dramatically different than the actual numbers. Students eligible for Federal Pell Grants are selected for verification most frequently, as full time students may be awarded as much as $5,775 in 2015-16! Good policy! By using the IRS DRT, they are more confident that your information is correct, so you can dramatically reduce your chance of being selected for verification.
Be aware not all families are eligible to use the DRT. If you filed as Married Filing Separately, are married and filed as Head of Household, filed a Form 1040X amended tax return, or filed a Puerto Rican or foreign tax return, you are not eligible to use the IRS Data Retrieval Tool, and you will need to enter your tax return information manually.
Here is some good news. Beginning with the 2017-18 financial aid application, this process will be MUCH easier. Why? There will be no provisional FAFSA, and as long as you qualify to use the DRT the information will be there from the prior, prior year. Parents of high school seniors in the fall of 2016 will file your FAFSA on October 1st, 2016 for the 2017/18 financial aid school year—your student’s college freshman year. Your 2015 Taxes will automatically be pulled in using the IRS DRT. Easy peasy. Our hope is that this will streamline and simplify the process dramatically.