Newsroom

Financial aid verification process impacted by changes to IRS tax transcripts

By Catherine Mueller

October 04, 2018

Changes to IRS tax transcripts, aimed at helping protect the identity of taxpayers, may make it a little more challenging to complete financial aid verification.

The Department of Education Office of Federal Student Aid (FSA) issued an Electronic Announcement today (Oct. 4, 2018) explaining changes to tax transcripts and third-party services.

The Internal Revenue Service (IRS) recently announced changes to these tax transcripts and third-party services:

• Effective September 23, 2018, the current format of the individual tax return transcript(s) was replaced with an updated version that redacts sensitive personal identifying information of the tax filer.
• At the end of the current calendar year, when taxpayers or third parties call the IRS with a transcript request, the transcript will be mailed to the taxpayer's address of record. The transcript will not be faxed on request to either the taxpayer or a third party.

In the announcement, the FSA said these changes are part of an effort to continue to combat stolen identity refund fraud, and to protect taxpayer information. In addition, FSA said it does not believe that the redaction of sensitive personal information will pose a significant burden for institutions in using the new tax transcripts for verification purposes. Institutions should still be able to identify and match the tax payer information on the tax transcript with the FAFSA information on file either by use of the limited redacted information provided on the tax transcript or by use of the new "Customer File Number" available on the new transcript. As a result the IRS tax transcript is still acceptable documentation for verification purposes.

In the spring of 2019 the IRS plans to remove the option for requesting third-party receipt of tax information from Form 4506-T and 4506T-EZ. Instead, transcripts will be mailed only to the taxpayer's address of record. Institutions still interested in receiving tax transcripts directly from the IRS may request to become participants in the IRS Income Verification Express Services [IVES] program by registering for e-Services on IRS.gov.