UPDATES ON VERIFICATION OF NON-FILING AND USE OF PROFESSIONAL JUDGMENT FOR 2020-2021

In other big news, ED quietly released two big updates for the 2020-2021 award year in the 20-21 FSA Handbook Application and Verification Guide.

In the first update, ED provided guidance for when a school can accept a signed statement from a student, spouse or parent to verify that they did not file a Federal Income Tax Return. According to the updated 20-21 Application and Verification Guide, Individuals who can’t get a VNF letter from the IRS (or other tax authority) may instead submit a signed statement as long as the school has no reason to question the student’s or family’s good-faith effort to acquire the letter. Form 4506-T states that most requests are processed within 10 business days, so at least that amount of time should elapse before schools resort to a signed statement. Also, since a VNF must be dated on or after October 1, 2019, the statement cannot be signed and used before then either. (See Chapter 4, P. AVG-98. “Individuals who can’t get a VNF letter.”)

The statement must assert that the person attempted but was unable to get the VNF. For non-tax filers, the statement must also confirm that they have not filed and are not required to file a tax return for the relevant year, and it must list the sources and amounts of income earned from work. For extension filers, the statement must also confirm that they have not yet filed a return for the tax year and must list the sources and amounts of income; if they are self-employed, it must include the amount of AGI and U.S. income tax paid. Note that in both cases—for non-tax filers and extension filers—the other required documentation (e.g., W-2 forms) must still be provided.

In the second update, ED officially rescinded guidance issued in several Dear Colleague Letters related to the Financial Aid Office’s use of Professional Judgment for students and families receiving unemployment benefits. The Department specifically rescinded guidance in GEN-09-04, GEN-0905 and GEN-11-04. In the June 12, 2020 Errata and Updates notice ED says they removed the last sentence on the page “because it referenced outdated guidance”, confirming that ED no longer considers GEN-09-04 and GEN-09-05 to be in effect for the 2020-2021 award year. See FSA HB AVG Chapter 5, Page 125.