Posted Date: March 18, 2013

Author:  Jeff Baker, Director, Policy Liaison and Implementation, Federal Student Aid

Subject: FAFSA Applicants Who May Have Been Impacted by a Tax Filing Software Issue Related to IRS Form 8863

We are aware that because of a technical error with a limited number of tax filing software products, some 2012 IRS tax returns that included “IRS Form 8863 - Education Credits” and that were filed between February 14, 2013 and February 22, 2013, may have been held pending an IRS review.  The IRS has announced that they are now taking special steps to process these tax returns and affected tax filers can expect their returns to be processed in 4-6 weeks.  We have been informed by the IRS that they are working hard to resolve the problem and to process affected returns as quickly as possible and they hope to reduce those projected time frames further.  More IRS information on this issue can be found on the IRS website at the following link: http://www.irs.gov/uac/IRS-Statement-on-Form-8863,-Education-Credits.

We have every reason to believe that this situation will be resolved in time for schools to make first disbursements for the 2013-2014 award year.  However, we also know that some families and their schools are concerned that important financial aid award information may not be available in time for families to make college-going decisions.  To address concerns about delayed awards we want to remind the community of the following longstanding guidance:

  • Completion and Submitting a FAFSA - A family does not need to wait for their tax return(s) to be processed by the IRS to complete and submit a FAFSA. The family can complete the FAFSA by simply typing in the information that is on their copy of the tax return(s).  Of course, if the IRS had processed the tax return(s), the easiest way to provide the information on the FAFSA is for the tax filer to use the IRS Data Retrieval Tool that will be presented to them when they go to “FAFSA on the Web” (FOTW) at www.fafsa.gov.

  • Verification - For applicants who have been selected by the Department to have their IRS information verified, this IRS processing delay could cause a delay in the ability of the school to provide the family with the student’s financial aid package in a timely fashion.  To address this, we remind schools that they could choose to collect paper copies of the tax returns, make any necessary FAFSA corrections, and make a tentative award to the student using the resultant ISIR.  Of course, until official verification using information from the IRS (i.e. tax filer’s use of the FAFSA – IRS Data Retrieval Tool or submission by the tax filer of an IRS Tax Return Transcript) is completed, no subsidized federal student aid Title IV aid can be disbursed.   We would expect that using information from the paper copy of the tax return(s) that was actually submitted to the IRS should mean that when official IRS verification information is subsequently obtained there likely will be no differences and therefore, no need to adjust the tentative award, except to make it final and ready for disbursement.

We have stated a number of times that the requirement that verification be completed based on official IRS data is critical to our shared objective of ensuring that federal student aid is awarded in absolute compliance with the statute.  Doing so thereby maintains the integrity of the federal student aid programs.  We thank all of our participating institutions for their role to achieve that objective.

   

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