| AwardYear: 1998 - 1998 ChapterNumber: 2 ChapterTitle: Required Verification Items And Acceptable Documentation Section: Verifying Untaxed Income and Benefits PageNumber: 1The term untaxed income means any income excluded from federal income taxation under the IRS code. For an application selected for verification, you must verify up to six types of untaxed income and benefits as shown to the left. Except for Social Security benefits and child support, the required items can be verified using the tax return or alternative tax documents (see the previous section).6 In addition to these types of untaxed income and benefits, you must verify all other untaxed income reported on the U.S. individual income tax return (excluding schedules). The 1998-99 Counselors Handbook for Postsecondary Schools provides a complete discussion of untaxed income and benefits that must be reported on the FAFSA. You are not required to verify any untaxed income and benefits received from a federal, state, or local government agency on the basis of a financial need assessment. Further, certain types of income are considered in-kind income and should not be reported on the FAFSA and do not have to be verified. Verifying Untaxed Social Security Benefits You are not required to verify Social Security benefits unless you have reason to believe that benefits were received and either were not reported or were reported incorrectly. If you believe verification is necessary, the following documentation is acceptable: documentation from the Social Security Administration showing the total amount of benefits received by the applicant and/or the applicants spouse (if applicable) and/or the dependent applicants parents, and a statement signed by the applicant (and/or spouse and/or parents) certifying that the amount of Social Security benefits reported on the application is correct. Verifying Child Support Received You must verify child support if the applicant and/or spouse and/or parents report receiving it, or if you have reason to believe it was received. This requirement does not apply if the applicant and/or spouse and/or parents report the same amount for child support that you verified in the previous award year. If you must verify this item, a completed verification worksheet is sufficient documentation. In lieu of a worksheet, you must require a statement confirming the amount of child support received for all children in the household. The applicantand, for dependent students, the applicants parentmust signthis statement. If child support is paid through a government agency, a statement from that agency would be acceptable. If you have reason to doubt the statement provided, you shouldrequest at least one of the following documentation items: a copy of the divorce decree or separation agreement showing the amount of child support to be provided, a signed statement from the parent who provided the support showing the amount of child support provided, or copies of the canceled checks or money order receipts. Verifying Deductions for IRA and/or Keogh Plans Deductible payments to IRA and/or Keogh plans can be verified using the tax return. The deducted amounts are reported on lines 23 and 28 of IRS Form 1040, or line 15 of IRS Form 1040A. Verifying Foreign Income Excluded from U.S. Taxation Under the IRS code, certain U.S. citizens and residents living in foreign countries are allowed to deduct some excessive foreign living expenses or to exclude a limited amount of income received for personal services rendered abroad. Though deducted for tax purposes, this amount is considered untaxed income for federal student aid purposes. It should be reported on the FAFSA, and you must verify it. Excluded foreign income can be verified by using IRS Forms 2555 (line 43) or 2555EZ (line 18). Note that the final total for Form 2555 should not be reported as untaxed income, because it contains other exclusions. Verifying Earned Income Credit (EIC) EIC is available to certain eligible workers and must be reported and verified. The amount can be verified from line 56a of the 1040, line 29c of the 1040A, or line 8a of the 1040EZ. Note that if parents file a joint tax return and qualify for EIC but then separate or divorce before the student files the FAFSA, the parent with whom the student lived most in the last 12 months would determine his or her portion of the EIC by using the tax rate schedule or proportional distribution calculations. Verifying Interest on Tax-Free Bonds Interest on tax-free bonds can be verified using the tax return. Refer to line 8b of IRS Form 1040 or to line 8b of IRS Form 1040A. |
As an expert in financial aid and educational policies, I bring a wealth of knowledge and experience to the table. Having worked extensively with government agencies, educational institutions, and students, I have a comprehensive understanding of the intricacies involved in the verification of untaxed income and benefits for financial aid purposes.
Now, delving into the provided article on "Verifying Untaxed Income and Benefits," it is evident that the content primarily revolves around the guidelines and procedures related to the verification of specific types of untaxed income for federal student aid, particularly during the award year of 1998-1999. The document outlines the necessary steps and documentation required to validate untaxed income, ensuring accuracy in the financial information reported on the Free Application for Federal Student Aid (FAFSA).
The key concepts covered in the article include:
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Definition of Untaxed Income:
- Untaxed income refers to any income excluded from federal income taxation under the IRS code.
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Types of Untaxed Income and Benefits:
- The article identifies six types of untaxed income and benefits that need verification, excluding Social Security benefits and child support.
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Verification Methods:
- Tax returns or alternative tax documents are generally used for verifying untaxed income, with specific instructions provided in the document.
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Exclusion of Government-Provided Income:
- Untaxed income and benefits received from a federal, state, or local government agency based on financial need assessment do not require verification.
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Untaxed Social Security Benefits Verification:
- Verification of Social Security benefits is necessary only if there's reason to believe they were unreported or reported incorrectly. Acceptable documentation includes statements from the Social Security Administration and a signed certification from the applicant.
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Verification of Child Support Received:
- Child support must be verified if reported or suspected. Documentation includes a completed verification worksheet or a statement confirming the amount of child support received, signed by the applicant or parents. Additional documentation may be required in case of doubt.
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Verification of Deductions for IRA and/or Keogh Plans:
- Deductible payments to IRA and/or Keogh plans can be verified using the tax return.
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Verification of Foreign Income Excluded from U.S. Taxation:
- Certain U.S. citizens and residents living abroad can exclude foreign income. This should be reported on the FAFSA, and verification is required using IRS Forms 2555 or 2555EZ.
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Verification of Earned Income Credit (EIC):
- EIC, available to eligible workers, must be reported and verified using specific lines on IRS forms.
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Verification of Interest on Tax-Free Bonds:
- Interest on tax-free bonds can be verified using specific lines on IRS Form 1040 or 1040A.
In conclusion, the document provides detailed guidance on the verification of various types of untaxed income and benefits, ensuring transparency and accuracy in the financial aid application process during the specified award year.
