The U.S. Department of Education (ED) has made enhancements to the Free Application for Federal Student Aid (FAFSA) on the Web related to the IRS Data Retrieval Tool (DRT) process. These most recent changes made in September, 2013 include the ability of the IRS DRT to import to the FAFSA the total “Income Earned from Work” for those with marital statuses of single, divorced, separated, or widowed. When the IRS DRT is used and the total “Income Earned from Work” field is updated, it results in the student and/or parent, as applicable, “Income Earned from Work” fields being updated to display dynamic text that indicates the value in that field was transferred from IRS. Additionally, if the student or parent modifies the field values, a message will display to indicate they changed them. Noteworthy is the fact that if the student or parent modifies the data in the “Income Earned from Work” field, it does not change the IRS Request Flag values. That is, a change in the amount of income earned from work does not affect the historic criteria for IRS Request Flags, which is based upon the original or amended adjusted gross income (AGI) or taxes paid figures, not income earned from work.
If the marital status of the individual whose income is being reported is married/re-married, the “Income Earned from Work” field will pull in the total figure of income earned from work as reported to the IRS, but will not populate the fields on the FAFSA. Instead, the figure will be in a view-only field on the FAFSA called the “Total Income Earned from Work”. The student and/or parent must then appropriately allocate the correct amount of the total shown to each wage earner as is applicable.
Another item related to the importing and display of “Income Earned from Work” fields is that a Form 1065 Schedule K-1 (Partner’s share of income, deductions, and credits, etc.) filtering question will display below the “Income Earned from Work” fields when the tax return type is 1040. The automatically populated response to that field will be “No”. If the student or parent updates that field to “Yes” because the partnership they are a member of filed a Form 1065 Schedule K-1, they will be prompted to enter a non-negative value in the field. (If there was a negative value on the Schedule K-1, it should be entered as a zero.) When a Schedule K-1 amount is entered, the total “Income Earned from Work” for the student/spouse or father/mother, as applicable, will automatically be calculated by adding the amount from Schedule K-1 to the amount originally reported for the applicable individual(s). It is important to note that the Schedule K-1 filtering question and fields will only display on the transaction for which the data was transferred via the IRS DRT. Subsequent transactions viewed on the FAFSA-on-the-Web site will display the calculated total “Income Earned from Work” plus Schedule K-1 amounts in the appropriate student or parent “Income Earned from Work” fields.