Federal Tax Information & FAFSA Data

By Rick Cox

Federal Tax Information is provided to the Department of Education by the IRS. FAFSA applicants and contributors must provide consent on the FAFSA for the IRS to provide FTI to the department. If consent is not provided by any contributor, the student is not eligible for Title IV aid. In providing consent, the contributor is agreeing to allow the department to:

• Use their personal information to match with the IRS
• Obtain their FTI from the IRS
• Use their FTI to determine eligibility for Title IV aid
• Redisclose their FTI to the school, state higher education agency or designated scholarship organization (United Negro College Fund and Hispanic College Fund)

This FTI must be protected in a secure manner to prevent disclosure of that information to unauthorized people.

The following items are considered FTI:

• Tax year
• Tax filing status
• Adjusted Gross Income
• Number of exemptions and number of dependents
• Income earned from work
• Taxes paid
• Education credits
• Untaxed IRA distributions
• IRA deductions and payments
• Tax exempt interest
• Untaxed pension amounts
• Schedule C net profit/loss
• Indicators for Schedules A, B, D, E, F and H
• IRS Response code

All other information not listed above as FTI is considered FAFSA data. FAFSA data is governed by FERPA and the HEA. FTI has additional requirements under the Internal Revenue Code of the IRS. A contributor’s manually entered income data is considered FAFSA data and not FTI.

FTI may only be used for the application, award and administration of financial aid to the applicant. It cannot be used for any other purpose such as for research in promoting college attendance, persistence and completion. It is unlawful to access, view, use or disclose (without the express written consent of the applicant) FTI for any other purposes other than those purposes authorized by federal law.

Please note that the willful unauthorized disclosure of FTI can result in a felony, fine up to $5,000, imprisonment up to five years plus the costs of prosecution. Willful unauthorized inspection of FTI can result in a fine up to $1,000, imprisonment up to one year plus the costs of prosecution.

Permitted Access, Disclosure and Use of FAFSA Data

• Application, award and administration of student financial aid program (federal, state and institutional)
• Used for research that does not release Personal Identifiable Information on an applicant, to promote college attendance, persistence and completion
• Disclosure to an external agency requires written consent

Permitted Access, Disclosure and Use of FTI

• Application, award and administration of student financial aid programs (federal, state and institutional)
• Disclosure permitted to other entities identified by the student but only for purpose of applying for and receiving federal, state, local or tribal assistance to cover any component of the Cost of Attendance
• Disclosure to the applicant upon their request

An applicant must provide written consent to allow redisclosure of FTI to a scholarship organization (including a tribal organization) or to an organization assisting the applicant in applying for and receiving federal, state, local or tribal assistance that is intended to assist the applicant in paying for any component of the Cost of Attendance. Additionally, an applicant may permit another individual, such as an advisor or mentor, to participate in discussions pertaining to data on the FAFSA, including FTI. However, the applicant must provide written consent for that individual to participate in those discussions.

Written consent means a separate, written document that is signed and dated (may be completed electronically) that indicates the information being disclosed includes return information, states the purpose for which the information is being disclosed, and states that the information may only be used for the specific purpose and no other purposes. This must be provided on a case-by-case basis for each entity to which information is being disclosed. You cannot use a blanket consent.

IMPORTANT: Even with written consent, FTI data may only be disclosed or used to assist the applicant in applying for and receiving aid toward a component of their Cost of Attendance (20 USC 1098h).

Resources
For guidance on the use of financial information for program evaluation and research, you can read more here.

Guidance on the access and use of FTI can be found here.

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