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Digging up “DRT” on the New FAFSA IRS Linking Tool

The following is a guest article provided by J. Randy Green, Director of Financial Aid at Wittenberg University

As part of ongoing efforts to improve the higher education financial aid delivery system, the IRS and Department of Education are working together within the FAFSA application process.  That work will cause frustrations for some families this year.

The idea is wonderfully simple: the Department needs to know family financial information to determine eligibility for financial aid; the IRS has information on family income.  It is natural for the two to share that information.

The tricky part: the IRS is very careful with tax filer information and does not want to share this information with anyone.  (This is a good thing!)

The elegant solution: when completing a FAFSA, a student can access, without leaving the FAFSA site, the IRS’ Data Retrieval Tool (DRT).  This tool allows the student to pick up his or her own financial information and drop it into the proper slots on the FAFSA.  Technically, the IRS is not sending the information to anyone; they are simply allowing tax filers to access their own information electronically.

Another tricky part: although the DRT is available starting February 1, the tax return needs to have been already processed by the IRS in order for it to be available through the DRT.  As many people do not file their taxes until March or April, and as many colleges require that FAFSA data be provided by February or March, many students will not be able to use the DRT during their initial FAFSA filing.  This means that many families will still use self-reported or estimated financial information when they file the FAFSA.

And the kicker: families that do not use the DRT will be much more likely to be selected for verification, which is like a mini-audit of their FAFSA, and they will have to provide IRS data to schools to document their income.  A bit more detail here: for many years, the verification process has required families to prove that their FAFSAs were completed properly.  Usually, this involved sending the school a copy of the federal income tax return.

Here’s where the frustration may kick in: starting with the 2012-2013 school year, financial aid offices may no longer use copies of tax returns to verify information – they must get the family’s information from the IRS.

This means that the family must request a tax transcript from the IRS or go back to the FAFSA site and use the DRT.  Since the delay in getting a tax transcript from the IRS may be as long as ten days, whereas the DRT provides information in a day or two, it seems safe to say the DRT will be getting a lot of use.

A final twist: if a student’s parents file their return as “married, filing separately” they cannot use the Data Retrieval Tool and, if selected for verification, will have no option but to request transcripts from the IRS.

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8 Responses to “Digging up “DRT” on the New FAFSA IRS Linking Tool”

  1. MARCOSOLO says:

    Thanks for info. We have a fairly early FAFSA filing deadline Mar 1st. Of course getting / waiting for all your forms to come in usually take well into the first 1 or sometimes 2nd week of February so , that doesn’rt give you a lot of time to do your taxes and your kid(s) and then file and wait so far 2 weeks 1 day after IRS has accepted my return and still haven’t yet important my info to FAFSA (it said allow 1-2 weeks). I was told by the univ. fin aid director (the head of ) and said this coming year make sure we use the data retrieval tool especially if you getpicked for Verification ( I’m batting 5 for 7 times with 2 kids in college). I on my Chat with FAFSA explained this since I am still waiting for (DRT) IRS data retrieval Tool to import and show up in FAFSA. The FAFSA person said no the school will accept a signed copy like they always have. Your article says what Fin Aid director said. Is it up to the school or up to FAFSA, who right who’s wrong. Both right or wrong depending on if it’s up to school. If FAFSA says its cool , then shame on school. The school says it cost $$ and more time to get an official IRS copy. If that’s the case shame on FAFSA for not stating that. However, this article states that you can still use the DRT for verification later. So is there a way to if we previously, due to time contraints enter it manually then later use the DTR? If you could help us and all readers get a clarication on this and steps how to that would be great. The DTR is great if you can use it. Last year it was not quite up to snuff and I had to do it manually a day before deadline (after waiting 3 weeks) and ofcourse got picked for verification. So I want to use it this year.

  2. Randy Green says:

    It is true that schools are NOT allowed to accept copies of tax returns from the family to complete verification. The information must come from the IRS either through using the DRT or by requesting a tax transcript.

    There is no charge for requesting a tax transcript, but there is one for requesting a copy of your tax return (which, again, schools are not allowed to use).

    Schools can request copies of the tax return for other reasons (to verify medical deductions, for example), but even so they cannot use them for verification purposes.

  3. Pete says:

    Bigger kicker is, if you owe taxes, it seems IRS won’t allow DRT until taxes are paid, even though taxes have been filed. Likewise it seems no transcript will be sent until taxes paid. This can really delay things. Any suggestions, can you verify this or get IRS to change practice?

  4. Randy Green says:

    We just found out last week that the IRS is processing returns for refunds first. Families who owe, even if they have filed and sent in their payment, are to be held until mid-April.

    This will likely not delay the creation of an initial award from the school, but that initial award will be tentative pending confirmation of income, etc.

  5. sarahc says:

    After holding forever with the IRS and the FAFSA people, I found out that the problem was not on our end but because if you have to pay as my daughter did because the tax credits were worth more to me the returns don’t start being posted until May 1st after the returns with refunds have been posted. Appears that when this bill was passed to bring in the IRS tool no one checked with the IRS about their posting procedures. My daughter’s college had us send them a copy of her return with the IRS acceptance email.My return had a refund so I managed to mograte that one.My daughter’s college won’t create any awards with out the tool used or a tax transcript which also has to wait until her return posts.

  6. Scotty says:

    This new system that the IRS believes is so great, is nothing but junk. They say you can’t submitt W-2’s or Copies of a tax return now, because the Tax Retrieval tool is so simple that there is no need. Yet they have a all of these criterias that make 95% of fillers inelegigable to use it. I have been waiting weeks for my tax transcripts to become available on the IRS site and they still are not up. It is amazing how the goverment continues to put road blaocks in front of people. Why are tax returns not good enough. I am not going to be able to start school in two weeks because the finacial aid office has to have my IRS Tax Transcript. When you call the IRS all they say is can take up 10 weeks to post a tax transcript even if you efile. This is how the goverment makes you dependent on them for everything.

    • Randy Green says:

      I hear you, Scotty. I have worked in the financial aid industry for more than twenty-five years and 2012 will go down in my book as one of the worst ever, in large part due to verification issues. At my institution, families expect us to be able to help them and I can’t tell you how many times we’ve spent 30-60 minutes on the phone, walking people through the DRT to try to get it to work. Next year may even be worse because, in addition to the DRT, schools are going to have to see photo IDs for some students before completing verification.

      Check with your school — in some cases (if you’re sure your FAFSA is correct), schools may make first disbursements on aid programs before verification is complete.

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