FAFSA Simplification & Federal Tax Income

Student applicants for federal aid will no longer retrieve and upload income data for the FAFSA in 2024-2025, when the IRS will directly transfer the information.

FAFSA Simplification & Federal Tax Income
Photo by Unsplash 

By Rick Cox

The FUTURE Act mandates FSA to use data obtained directly from the IRS (FADDX – Future Act Direct Data Exchange).

Because the data is provided directly by the IRS, it will still be considered IRS data instead of FAFSA data. This is covered by more stringent requirements under the IRS code, and the IRS can take action against individuals who inappropriately use or disclose federal tax information, or FTI.

The data can be used for the FAFSA, income-driven repayment plans, and the Total and Permanent Disability Discharge Program.

Dear Colleague Letter GEN-22-02 provides guidance on using FAFSA data for the administration of several federal benefits programs.

The Department of Education is working on training for the changes to 2024-2025.

Under the FUTURE Act and FAFSA Simplification Act, changes were made to how income data would be received for tax filers. The IRS Data Retrieval Tool will be retired with the 2024-2025 award year. The FUTURE Act amended the way the IRS authorized FSA to receive individuals’ income information directly from the IRS. This change will replace the IRS DRT with Direct Data Exchange (DDX). The data will come directly from the IRS to the Department of Education/FSA beginning in the 2024-2025 award year.

The FAFSA applicant, including the student’s spouse or parents, must authorize their FAFSA information to be disclosed, which would include the discloser of FTI to an institution or a state.

Rick Cox is Global’s Executive Director of Regulatory Affairs and Compliance