ADVANCED VERIFICATION

PASFAA CONFERENCE 2010LANCASTER, PA

Marykay KlaraAssociate Director of Financial

AssistanceVillanova University

POLICIES

• “Because students sometimes make errors on their application, colleges have procedures for verifying the reported information.” (2010 AVG 81)

POLICIES

• “If your school has conflicting information concerning a student’s eligibility or you have any reason to believe a student’s application information is incorrect, you must resolve the discrepancies before disbursing FSA funds. If you discover discrepancies after disbursing FSA funds, you must still reconcile the conflicting information and take appropriate action under the specific program requirements.” (2010 AVG 106)

POLICIES

• “While Financial Aid Administrators do not need to be tax experts there are some issues that even a layperson with basic tax law information can evaluate. Because conflicting data often involve such information, FAA’s must have a fundamental understanding of relevant tax issues that can considerably affect the need analysis…” (2010 AVG 107)

BASIC REQUIRED VERIFICATION ITEMS

• Household size• Number in college• Adjusted gross income (AGI)• U.S. taxes paid• Certain types of untaxed income and

benefits: ➔ Child support ➔ IRA/Keogh deductions ➔ Interest on tax-free bonds

• All other untaxed income included on the U.S. income tax return, excluding information on the schedules(34 CFR 668.56) (AVG 81)

ADVANCED VERIFICATION POSSIBILITIES

• INCOME

• SAVINGS AND DIVIDENDS

• CAPITAL GAINS/LOSSES

• RENTAL PROPERTY

EARNED INCOME

Line 7 of Tax Return

• Check against W-2 Forms (box 1 vs. box 5)

• Other income –tips

• 1099 Form – consultant or part/time employee (compensation)

Earnings

INCOME

Line 11 of Tax Return

– Alimony Received

– May indicate Child Support exists

Possible child support

BUSINESS INCOME

Line 12 of Tax Return

• Schedule C

– Possible Income from working at home (line 1)

May be income from working at home

High debt for equipment in the home

Earned income

BUSINESS INCOME

Line 17 of Tax Return

• Schedule E

– Book Royalties

– Property Management and Rental Income

– Potential assets of the family» rental property

Potential Assets

Do you add this to income?

BUSINESS INCOME

Line 18 of Tax Return

• Schedule F

– Farm Income

Do they live on the farm or is it an investment property?

INCOME

Line 19 of Tax Return

• Unemployment Compensation

– Taxed and Untaxed

Taxed and untaxed

OTHER INCOME

Line 21 of Tax Return

• Other income

• What is it?

Source of Income

ASSETS

Line 8 - Interest Income

• Schedule B

• Does savings support the amount reported?

• How do you compute a value?

Assets – do not include life insurance

ASSETS

Line 9 - Dividend Income

• Schedule B

• Does investments support the amount reported?

• Usually better to impute a higher rate as these assets are riskier and have better rates of return

Riskier Assets

ASSETS

Line 13 – Capital Gains/losses

• Schedule D

Line 14 – Other Gains/losses

• What created the amount listed – stocks sold?

• Review amounts listed on Line 3 and Line 10 – should have at least a combined amount listed in savings/investments

Cash received

Cash received

ASSETS

Schedule C

– Line 16 (mortgage interest) – Line 20 (rent or lease) – is the

building tied to the business and is it listed on Schedule E as parents’ personal asset?

If working from home what is this?

If working from home what is this?

ASSETS

Schedule E

– Is it business related or personal?

– Royalties – what did they do with all of the income earned

– Rental Property • calculate net worth %• www.zillow.com

Watch for more than one property listed

Do you add this back to income?

Value computed or on a form?

This is only for the year in question – not overall

ASSETS

Form 8825 – Rental Real Estate Income and Expenses of a Partnership or S Corporation

– Line 2

Gross Rents

• Is income tied to a business or personally owned rental property made to look like a business?

What type of property is this – is it really a business?

If personal property – can be source of value