IRS Data Retrieval Tool and Inaccurate $1 Adjusted Gross Income (EA ID: VERIF-21-01)

Author
Federal Student Aid
Subject
IRS Data Retrieval Tool and Inaccurate $1 Adjusted Gross Income (EA ID: VERIF-21-01)
Recently Federal Student Aid (FSA) has become aware of instances where applicants have completed a 2021–22 Free Application for Federal Student Aid (FAFSA©) form, used the IRS Data Retrieval Tool (IRS DRT) to transfer their tax return information, and had their adjusted gross income (AGI) inaccurately reported as $1 for Title IV purposes. We were alerted to these instances after institutions questioned these $1 AGIs while resolving conflicting information or when providing financial aid counseling to the student.

Background

Based on what is known to date, these instances of $1 AGI are related to the Internal Revenue Service’s (IRS) Non-Filers: Enter Payment Info Here Tool that was created to assist individuals who do not typically file a U.S. tax return but were likely eligible to receive an Economic Impact Payment (EIP), otherwise known as stimulus checks. Individuals were directed to use the Non-Filers: Enter Payment Info Here Tool to register for EIPs they were entitled to receive. However, some taxpayers did not follow the IRS guidance and used the Non-Filers: Enter Payment Info Here Tool when they were required to file a tax return, in spite of the guidance that clearly stated that if the applicant was required to file a tax return they should NOT use the tool to obtain their EIP. The Non-Filers: Enter Payment Info Here Tool used to claim the EIP recorded the taxpayer’s AGI as $1.

U.S. Tax Return Filers

At this time there is no ISIR flag that provides an indication that the IRS DRT has transferred an inaccurate AGI. In fact, in most cases the IRS Request Flag will still appear as 02, indicating the IRS DRT was used and none of the data was changed. However, FSA is currently working with our partners at the IRS to determine the extent of this issue. It should also be noted that, at this time, institutions are not required to actively identify applications that may meet this condition.

In the interim, for the 2021–22 award year, if a student (or parent if, applicable) is an IRS tax filer and institutions become aware of an inaccurate AGI after the student (or parent) uses the IRS DRT, the institution may accept a signed copy of the student’s (or parent’s) Federal tax return to correct the student’s FAFSA and offer Title IV aid based on the accurate income and tax information.

Verification of Non-filing

There are instances where non-tax filers who correctly used the Non-Filers: Enter Payment Info Here Tool have a tax return created by the IRS with an AGI of $1. These individuals may be unable to obtain a Verification of Non-filing Letter (VNF) from the IRS by normal processes. When requesting a VNF, the IRS may send a transcript with a $1 AGI instead of the VNF. Applicants in this situation, who are not otherwise able to obtain the VNF through the normal process, may contact IRS Customer Service at 1-800-829-1040 and explain that they used the Non-Filers: Enter Payment Info Here Tool, are unable to obtain a VNF, and request IRS Letter 3538. Schools may accept IRS Letter 3538 as the VNF (see attached example). The IRS Letter 3538 should only be requested by individuals who meet the criteria described above.

In cases where individuals are unable to obtain VNF from the IRS or IRS Letter 3538 in a reasonable amount of time, the institution may accept a signed statement certifying that the individual attempted to obtain the VNF from the IRS and was unable to obtain the required documentation.

There are also a limited number of instances where individuals who were not required to file (non-tax filers) filed a tax return just to claim the stimulus check instead of using the Non-Filers: Enter Payment Info Here Tool. To complete verification, these individuals would not be required to provide a VNF but should use a copy of the tax return filed and any other documentation needed to support the information reported on the FAFSA form including the applicant’s (and parent’s) W-2s.

Thank you as we continue to work together to support students and parents during these difficult times.

Last Modified: 03/25/2021