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July 25, 2024 -- Yesterday, the Department of Education (ED) issued yet another change to guidance around Resolving Conflicting Information.
(If you have not already seen it, I encourage you to read my LinkedIn post about the change to an aid administrator’s responsibilities if they learn that a contributor to an applicant’s FAFSA amended their 2022 tax return.)
The new guidance, in an update to GENERAL-24-71 Resolving Conflicting Information, covers the situation when a contributor manually reports that they did nor will not file a 1040, but the FA-DDX transferred Federal Tax Information (FTI) from the contributor’s tax return into the FAFSA.
Because the FAFSA Processing System (FPS) uses contributor provided manual data instead of FTI in the Student Aid Index (SAI) and Pell eligibility calculations, these ISIRs would show a –1,500 SAI and Maximum Pell eligibility, because they would be processed as non-filers even though the ISIR clearly shows a tax return was filed.
Today’s update removes prior irresponsible and illegal guidance that would have unlabeled Federal Tax Information (FTI) and put institutions and financial aid administrators (FAAs) in legal and civil jeopardy, and instead asks FAAs to collect tax information that is not FTI to correct the ISIR.
FAAs must collect a tax return transcript or a signed copy of the contributor’s Form 1040 and applicable schedules and use these non-FTI documents to correct the contributor’s tax data. FAAs will take the data from these non-FTI sources, and manually enter them into the relevant manual tax data section of the ISIR. All fields in the manual section of the ISIR must be updated, including changing the tax filing status from “did and will not file” to “did or will file a Form 1040”. And the FAA must also set the Professional Judgment flag to “Yes” to force the FPS to use manual data, and not FTI in the calculations, even though this is a correction.
[As an aside, I don’t get this “set the PJ flag” for corrections anymore. Why does an aid administrator need to set the PJ flag when they input manual data, when it seems that manual data is used when it is provided by a contributor? Is there a difference here? I’d like an explanation from ED, but in the scheme of things, it’s not really that important.]
I am relieved that ED has reversed its earlier, irresponsible guidance about de-labeling FTI. I have lost a lot of sleep worrying about my friends who work in financial aid offices who might have ended up in prison just for following this former guidance from the Department of Education. It’s a little more work for FAAs, but at least it’s not criminal activity.
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