There isn't any rule that needs you to employ the IRS Data Retrieval Tool, (DRT), however, the Department of Education could be very happy if everyone did utilize it when filing the FAFSA.
We’ve had several people in our Affording university 101 group mention they have received an e-mail suggesting they are doing so.
So…should you use the IRS Data Retrieval Tool or not?
Who Is Permitted to Use the IRS Data Retrieval Tool?
Most students and parents who filed a U.S taxes using the Irs (IRS) qualify to use the government Data Retrieval Tool (IRS DRT) should they have already filed their taxes.
When You Should NOT Use the DRT
Those who should not (or cannot) make use of the tool (as mentioned on the studentaid.ed.gov website)
- The student/parent is married, and only the student/parent or his/her spouse filed as Married Filing Separately.
- The student/parent is married, and either the student/parent or his/her spouse filed as Head of Household.
- The parents' marital status is “Unmarried and both legal parents living together.”
- The student/parent filed a Puerto Rican, foreign tax return, or an IRS Form 1040-NR or 1040NR-EZ
- You have been assigned a name Protection PIN through the IRS
- You have experienced a general change in marital status because the tax year in question. This includes marriage, divorce, or even the death of a spouse. You should report income based upon your current marital status
- Your present address and the address in your relevant tax return are different
- You haven't yet filed (or JUST filed) the relevant tax return
- You filed an amended taxes for that year under consideration. The DRT is only going to pull the information out of your original tax filing.
Any students or parents who meet the above criteria will need to manually enter their tax return information.
Additionally, students or parents who filed their tax returns electronically in the last 3 weeks or through the mail within the last 11 weeks, might need to manually enter their taxes information or return at a later date to transfer their tax return information in to the Free Application of Federal Student Aid (FAFSA(R)) form because their tax return information may not be available for transfer from the IRS.
IRA Rollover: Proceed with Caution
If you rolled over an IRA or type of pension in your FAFSA tax year, your income and expected family contribution (EFC) might be artificially inflated and treat the rollover as income.
The same issue could occur should you received Covid-19 unemployment benefits under the CARES Act,
This could incorrectly increase EFC, lowering the amount of help you could be eligible for a.
For recent times, the government DRT system has not properly retrieved and applied information associated with IRA or pension plan rollovers. The information retrieval tool does not identify and exclude taxes IRA and/or Pension distributions which have been rolled over into another account.
Be aware that for security measures, once information is imported in to the FAFSA application, the fields is going to be marked as complete, but will not show the values.
You will not be able to determine or affect the imported numbers, that is problematic when rollovers are not properly handled.
Benefits of Using the IRS Data Retrieval Tool
It has been suggested that using the IRS DRT may potentially reduce the chance of the student's FAFSA being selected for verification.
If this is true, that’s the best thing, as being selected for verification needs time to work and effort.
Here are our suggestions…
To be safe and sound, whether you choose to use DRT or otherwise, order your tax transcripts just in case the college requests verification and ensure your student is checking his/her student portals for any requests for docs and/or educational funding award notices.
You can order your tax transcript here and don't forget it's for that tax year you employed for filing FAFSA.
One More Thing…
If you DO use the IRS tool, expect that you will get a letter or email in the IRS letting you know that they are checking to verify that you’re aware of the truth that someone accessed your records.
There’s you don't need to panic if you notice it; just know it is going to be coming.
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