Income verification is the process of checking monthly income and identification data. It is used for several purposes, all of which revolve around determining a person’s eligibility for a service, loan, or rental.
The income verification process in higher education helps schools assess if students qualify for financial aid. This applies to all students, regardless of their social class.
The income verification process is complex. But is it necessary for all students to participate? Yes.
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The cost of higher education is increasing quickly, making it unaffordable for many students. Even students attending so-called “affordable online colleges” feel the impact of rising tuition fees.
Financial literacy is the primary solution to making the cost of higher education somewhat manageable. Knowledge of the income verification process may give you a better chance of receiving financial aid and affording online colleges.
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Why Do Online Colleges Verify Income?
Many students may ask why this process is necessary regardless of their financial situation. The reasons are pretty simple:
- To ensure that financial assistance is distributed fairly and equitably among all applicants.
- To ensure the accuracy of the information reported on the FAFSA,
- To help online colleges follow federal and state rules.
In some cases, students from low-income households may receive a different tuition rate after the income verification process. For instance, students from households earning no more than $60,000 a year may receive free tuition.
In short, this streamlined process helps colleges allocate resources more effectively. It allows them to support students who might otherwise struggle with financial burdens.
Anyone can easily lie on financial aid forms. They can write down that they’re earning this little when they’re actually earning more to get tuition discounts. This has happened way too many times in the past.
Steps in the Income Verification Process
Income verification in higher education is a two-step process.
Step #1: Receive the request.
You need to know that not all students are requested for verification. However, this happens when you’ve been chosen for a financial aid opportunity based on your FAFSA application.
Online colleges will usually give you at least 24 hours to reply. This is why constantly checking your email during college applications is very important. Not responding within the given time might forfeit the opportunity.
Step #2: Submit the required documents.
The college will give you enough time to submit all the required documents, usually documents proving your need. We will discuss this in detail later.
Each online college may have different steps for submitting the required documents. For instance, some online colleges may ask you to submit documents online. On the other hand, some may require you to fax the documents. Again, be attentive.
What Documents Do You Need?
The required income verification document may vary depending on the student’s enrollment status. New students may need to provide different documents compared to current and returning students. Some of the most common documents you need to secure during the process include:
Federal Tax Returns (IRS Form 1040)
One of the official forms American taxpayers use to file their yearly income tax returns is the IRS 1040 form. You record your income and deductions in several parts of the 1040 form to determine how much tax you owe or how much refund you might expect.
Dependent students must also submit their parents’ federal tax returns, whether they are required to file taxes or not. You might also need to submit a signed and dated copy of your spouse’s tax return.
To get a Tax Return Transcript from the IRS:
- Go to the IRS website and use the “Get Transcript” tool to request it online.
- Confirm your identity by providing details from your tax return, like your Social Security Number, name, and address.
If you did not file a tax return, you must provide a Verification of Non-Filing letter.
Wage and Tax Statement
Wage and Tax Statement, or W-2 forms, provide detailed information about your wages and the amount of taxes withheld from your paycheck. You can ask for these forms from your employers. Again, if you’re dependent, you must also submit your parent’s or spouse’s W-2 forms.
Alternatively, you can submit pay stubs. These documents will detail your earnings for a specific pay period and often include deductions for taxes, retirement contributions, and other benefits.
Verification Worksheet
Some colleges provide a verification worksheet you must complete and submit with your tax documents. This worksheet helps collect additional information necessary for verification purposes.
Again, it’s important to read the instructions carefully. The specific documents required for the income verification process may vary depending on your circumstances. Submitting the wrong documents may have consequences.
Here are a few frequently asked questions:
- What if I don’t have an SSN, ITIN, or EIN?
If you don’t have any of the listed IDs and didn’t file taxes, you should write a signed and dated statement that says:
- You don’t have a Social Security Number, Individual Taxpayer Identification Number, or Employer Identification Number.
- List where your money came from and how much you got for that tax year.
- Include W-2 or 1099 forms for each source of income listed.
Send this statement with the Income Verification form you need to complete.
- What if I amended my tax return?
If you changed your tax return, you need to give different paperwork. The IRS Data Retrieval Tool and Tax Return Transcript only show details from your first tax return, not the changes you made. Here’s what you must provide:
- A full copy of your IRS Tax Return Transcript
- A signed copy of Form 1040X
OR
- A signed copy of your original Income Tax Return (Form 1040) before you change it, plus Schedules 1, 2, and 3 if needed.
- A signed copy of your Form 1040X.
- What if I filed a foreign tax return?
In this case, you need to submit a translated transcript with income and tax details. Convert currency using the date of your aid application submission. If no free transcript is available, show proof of fees and submit a signed copy of your foreign tax return. For both US and foreign returns, follow FAFSA guidelines.
How Online Colleges Make It Easier
Beyond college affordability, online colleges also aim to make students’ lives easier. These colleges leverage technology to facilitate the process of filing for income verification.
Unlike traditional colleges, completing the income verification process won’t require you to travel to submit the necessary income documents. You can complete the process by submitting the documents electronically through secure portals. However, some online colleges may require you to use fax machines.
Other than that, the process for income verification for both online and traditional colleges is basically the same.
Tips for a Smooth Verification Process
The process to verify income for college tuition aid is relatively easy—if you read the instructions carefully.
Tip #1: Provide complete documentation upfront.
This is the most important tip. Providing the necessary documents promptly ensures that your verification process goes smoothly and without delays. This shows the college your promptness and commitment to your education.
Tip #2: Do not lie on your FAFSA form or any other college form.
Lying for financial aid is not uncommon, especially with the notable rise in educational and living costs. However, if you think the college won’t find out, think again. Aside from getting yourself disqualified from any financial assistance, lying on forms will ruin your reputation.
Online colleges are becoming increasingly sophisticated in their verification processes. They’re now using enhanced verification tools like the IRS Data Retrieval Tool to cross-check student information.
Tip #3: Follow instructions closely.
Each online college may have slightly different requirements or procedures for income verification. It’s crucial to read and follow the instructions provided by your college carefully. This includes how to submit documents, deadlines for submission, and any specific forms or worksheets that need to be completed. Failure to follow instructions could result in delays or even rejection of your financial aid application.
Tip #4: Keep copies of submitted documents.
If sent via email, it’s not uncommon for some attachments to go missing or broken. In rare cases like this, having copies of all the documents will be handy if the college ever needs you to send them again.
Tip #5: Check emails constantly.
It’s important always to check your email in case the school has further questions. While schools allot time for you to answer any follow-up questions and submit additional documents, responding promptly will prevent unnecessary delays.
If you have any questions or clarification, do not hesitate to ask the school’s financial aid office. It’s better to ask questions than to think you know it all and risk making a mistake. A single mistake could alter your financial aid application.
Conclusion: Why Accurate Income Verification Matters
The income verification process for financial aid in online colleges is similar to that of traditional colleges. You must submit the necessary documents accurately and promptly to secure financial assistance. Discrepancies may cause the college to question your financial need or eligibility.
Some schools may have a more complicated income verification process than others. It’s important to seek professional help if you don’t fully understand the process or the documents asked to avoid any mistakes.