You can use the data from a student’s 2016-2017 ISIR that has an “02” IRS Request Flag code (referred to by some as the “Data Retrieval Tool” code, or DRT code) for verification of the student’s 2017-2018 ISIR data without having to request a tax return transcript.
As an example, consider a student for whom you have a 2016-2017 ISIR and the ISIR has the “02” IRS Request Flag code. The student was not selected for verification in 2016-2017. The 2017-2018 ISIR was selected for verification, but there was no “02” IRS Request Flag code on the 2017-2018 ISIR, nor was there a SAR Comment Code 399 (which, as you will recall, is assigned when the student or parent reported different 2015 income and tax information on their 2017-2018 FAFSA than what was reported on their 2016-2017 FAFSA). In this hypothetical student example, the 2015 income on both years’ ISIRs is the same.
The U.S. Department of Education’s (ED) guidance in Dear Colleague Letter GEN-16-14 states that, if there is no comment code 399, “the institution is not required to determine if there are any differences in income or tax information between the two ISIRs.” It goes on to state that “…If the institution is aware that, subsequent to verification or subsequent to the use of the IRS DRT, an amended 2015 tax return was filed with the IRS, the institution must ensure that both years’ EFCs were calculated using amounts from the amended tax return, regardless of whether verification was completed or the IRS DRT was used.”
The question was asked: Should the school inquire of the applicant/parent (tax filers) as to whether the applicant/parent (tax filers) have filed an amended tax return for 2015, or otherwise made changes to their originally filed 2015 tax return which generated the “02” IRS Request Flag on the 2016-2017 ISIR? Or, can the school use the “02” IRS Request Flag from the 2016-2017 ISIR to verify the 2017-2018 ISIR?
FAME’s latest guidance from ED is that there is no requirement that a school ask if the applicant/parent (tax filers) filed an amended return in such a scenario as the example described above, as long as there is nothing that indicates they did file an amended return. The information referenced above in the Dear Colleague Letter about amended tax returns is speaking more to a situation where a school finds out in the normal course of business that an amended return was filed, such as in a general conversation, if additional paperwork was submitted that might indicate an amended tax return was filed, and so on.
A school may use the 2016-2017 ISIR with the IRS Request flag (DRT) “02” code for verification of the 2017-2018 ISIR that was selected for verification.
This material is presented for informational and educational purposes only and should not be considered to be giving legal advice.