IRS Data Tool Making a Comeback
Anyone who has filled out the Free Application for Federal Student Aid (FAFSA) knows it can be stressful. When the IRS Data Retrieval Tool was introduced for the 2009-2010 school year, it changed the way people filled out the income section. And the whole process became much easier. It also proved to be invaluable for those submitting initial and annual applications for income-driven repayment plans.
But in early March, the IRS Data Retrieval Tool was temporarily disabled due to security risks. It came to light that identity thieves were using the tool to gather information about individuals, including their adjusted gross income. Once they have one piece of information on someone, they can more easily get more.
According to a WZZM article, ID thieves used the data they took from the IRS Data Retrieval Tool to submit fraudulent tax returns. They collected the refunds onto prepaid cards. Often, victims were not aware it had happened until they filed their taxes and were denied. About 8,000 of these fraudulent refunds were paid out, totaling about $30 million. Thousands of other claims were caught before the refunds were sent.
Though the removal of the data tool made filing FAFSA applications more difficult, John Koskinen, IRS Commissioner, said it was necessary: “While this tool provides an important convenience for applicants, we cannot risk the safety of taxpayer data. Protecting taxpayer data has to be the highest priority, and we will continue working with FSA to bring this tool back in a safe and secure manner.”
While the tool is down, families need to manually input information. But there is a good ending to this story.
The tool came back online in June for IDR applications and will be coming back on October 1, 2017, for FAFSA applications, in time for use in the online 2018-2019 FAFSA form.
To address the security risks, the transferred data will not be visible. While this means ID thieves will not be able to grab the information, families may worry about not seeing the information they are submitting. Reporting $250,000 in income versus $50,000 can mean disqualification for financial aid they desperately need.
Along with the new encryption, filers should be aware of a few more things:
- Dual-income parents filing jointly will need to manually input their earned income from their W-2s.
- Filers will not be able to correct transferred data, which may result in corrections that require more work.
- Filers who roll over money from one IRA to another should be very careful that the transfer does not inflate their income reportings in the form.
Having the IRS Data Retrieval Tool back online will make filing the FAFSA much simpler for families. As always, it’s a good idea to fill out these forms early, both for ease of mind and to build in time for corrections if necessary.
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