The United States Department of Education (ED) provided clarification on October 23, 2013 as to what constitutes acceptable documentation regarding IRS Tax Return Transcript requirements for the remainder of 2013-2014. In the announcement, ED specifies further situations when a paper Federal tax return may be accepted for verification purposes. Previously, financial aid administrators were informed that there were limited circumstances in which a signed copy of a paper tax return may be accepted. The most common of those restricted scenarios included cases where a tax filer had experienced identity theft, filed an amended tax return, or filed a foreign tax return. ED now expands the situations in which a signed copy of a paper tax return may be accepted to include situations in which a tax filer requested an IRS Tax Return Transcript using the IRS paper or online methods for requesting the tax transcript but was unsuccessful in obtaining it. However, the signed copy of the paper tax return alone is not sufficient.
First, to be considered acceptable alternative documentation for verification purposes, the signed paper copy of the 2012 IRS tax return (IRS Form 1040, 1040A, or 1040EZ, as applicable) must be accompanied by:
- In situations where the transcript request was made using IRS Form 4506T-EZ or Form 4506-T, a copy of the response from IRS to the tax filer informing the filer that IRS could not provide the requested transcript. The copy of the IRS response submitted to the school must be signed by the tax filer.
- In cases where the transcript request was made using the IRS online transcript method, a copy of the screen print of the official IRS Web page that displayed the message indicating that the transcript request was unsuccessful. The screen print copy being submitted to the school must be signed and dated by the tax filer.
It is important to note that since the IRS does not have a method for providing written confirmation or documentation of the failure of an IRS Tax Return Transcript request made via its telephone request process, this method will not be acceptable as alternative documentation for verification purposes. If the telephone request was unsuccessful in providing the necessary tax return transcript, in order to be able to document the lack of success in obtaining a transcript, the tax filer will have to use one of the other methods of requesting an IRS Tax Return Transcript detailed in the steps above.
Next, in addition to a signed copy of the tax filer’s paper tax return and the applicable documentation of inability to obtain an IRS Tax Return Transcript, the tax filer must also complete and submit to the school an IRS Form 4506T-EZ or Form 4506-T on which the tax filer has listed the school’s name, address, and telephone number on line 5 of the form. Providing this information on line 5 designates the school as the authorized third party to which the IRS will send the tax filer’s 2012 IRS Tax Return Transcript. Note, however, that unless the school has reason to doubt the accuracy of the information submitted on the signed paper copy of the tax filer’s income tax return, the school should not actually submit the IRS Form 4506T-EZ or Form 4506-T to the IRS. Instead the school should simply retain the document in its files and proceed with completing verification of the student’s application data. But, if the school has reason to question the accuracy of the information on the signed paper copy of the tax return, the school must submit the Form 4506T-EZ or Form 4506-T to the IRS and wait for the IRS to either send an IRS Tax Return Transcript to the school or confirm that such transcript is not available for the tax filer.
Of interest is that ED has not limited the scenarios to which the above guidance applies for 2013-2014. That is, ED does not give further specific examples as to situations where the alternative acceptable documentation may or may not be used. (The only named illustrations are the previously stated cases of identity theft, amended tax return being filed, foreign or Puerto Rican tax returns filed, etc.) As an example, it has been inferred by some that tax filers that owe money to the IRS may not be able to obtain an IRS Tax Return Transcript. In such situations, a school should be able to utilize the guidance above for any situation in which a tax filer is not able to obtain an IRS Tax Return Transcript, absent any guidance from ED to the contrary, as long as the steps are followed as outlined above and the appropriate documentation is obtained as detailed.