The IRS Data Retrieval Tool, which made it easier to transfer tax return info to the FAFSA, is set to return on October 1st.
Much to the smiles of student loan borrowers across the United States, the IRS Data Retrieval Tool is set to return to the Free Application for Federal Student Aid (FAFSA) on October 1st.
The IRS had shut down the Data Retrieval Tool back in March after learning that the tool was being used by hackers and criminals to access the sensitive personal and financial information of student loan borrowers in the U.S.
The return date of October 1st is very timely for the IRS, student loan borrowers, and the office of Federal Student Aid (FSA). Starting on October 1st, student loan borrowers and their families will be able to use the tool to submit data from their 2016 tax return when applying for federal financial aid for the 2018 - 2019 academic year. On October 1st, consumers are allowed to begin filing paperwork for financial aid for the 2018 - 2019 school year.
The purpose of the IRS Data Retrieval Tool was to make it easier for financial aid applicants to transfer their income-tax data onto the FAFSA form and various other forms related to income-driven repayment plans. If a student loan borrower wishes to obtain federal financial aid, they must file a FAFSA.
Hacking criminals were able to use the IRS Data Retrieval Tool to look up the adjusted gross income on applicant’s tax returns. The IRS Commissioner, John Koskinen, admitted that 100,000 taxpayers were put at risk when they used the IRS tool to apply for federal aid because of the hackers.
The criminals would begin filling out the FAFSA and then grant the IRS permission to fill out the rest of the application with the appropriate tax information. Because they had a person’s adjusted gross income, the hackers could have access to more information on the victim’s previous tax return. The criminals would then use all of the available information to file a fraudulent tax return, in the hopes of accessing possible tax credits to inflate a tax refund.
According to Koskinen, roughly 8,000 fraudulent tax refunds were issued because of the IRS Data Retrieval Tool on the FSA website, which equated to $30 million. In one instance, two men were charged with stealing $12.6 million from the U.S. Treasury by using stolen information via the IRS Data Retrieval Tool and filing phony tax returns.
When the IRS Data Retrieval Tool comes back online on October 1st, how will it be safer than before? First, encryption technology has been added to the IRS Data Retrieval Tool so that taxpayer information is better protected. Second, borrowers that file the FAFSA will no longer be able to see exact income numbers from their tax returns show up on the FAFSA. Rather, the applicant will just be able to see that the data has been transferred from the IRS. Third, parents that file a joint income tax return will need to submit their earned income information from their W2 manually. Fourth and finally, applicants for federal student aid will not be able to make their own corrections to the transferred data from the IRS. If a corrected tax return is filed, they will need to show a copy to the financial aid office of whatever college they are attending.
Student loan borrowers across the U.S. rely heavily on federal student loans to shoulder the cost of attending a higher education institution. According to The Student Loan Report, 94 percent of student loan borrowers use federal student loans to help them attend college. Out of the $1.41 trillion in student loan debt in the U.S., only $7.76 billion is due to private student loans, the rest of that debt is due to federal student loans.
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