Here are the regulations, straight from the 2023-24 Federal Student Aid Handbook. While changes made by requesting paperwork from the FAFSA Helpline is technically compliant with regulations (although this is the first year I have heard that it has been allowed), this will not mean that it’s the end … every school will at some point request the documentation described in the regulations. A tax transcript will not be required DUE TO updating FAFSA manually…but any other changes to items transferred through the DRT besides the rollover will result in the schools requiring the tax transcript. And of course, anyone who was selected for verification will have to complete verification, submitting all documents required for the verification. Here’s the section from the 23-24 FSA Handbook:
RS Data Retrieval Tool: Of course, the FAFSA-IRS Data Retrieval Tool cannot know if the word “Rollover” was included on the tax return. Therefore, it assumes that the total difference between the distribution reported on line 15a or 16a, and the taxable portion on line 15b or 16b is untaxed income for EFC purposes, and that amount will be transferred from the FAFSA-IRS Data Retrieval Tool into the FAFSA as untaxed income for IRA distributions or pension distributions.
The FAFSA applicant, the applicant’s parent, or the institution may modify the amount that the FAFSA-IRS Data Retrieval Tool transferred into the FAFSA, if all or a portion of that amount should not be included as untaxed income because of a rollover. To support such a change, the institution must maintain documentation (see below) that the amount not included in the FAFSA was an amount that was the result of a rollover.
Beginning with the 2018-2019 FAFSA processing year, if the applicant or the applicant’s parent indicate that the amount transferred from the IRS into the FAFSA for the IRA distributions field or pension distributions field includes a rollover, he/she will be required to provide the amount of the rollover in a new entry field. Our system will then subtract the reported rollover amount from the amount of the IRA or pension distribution that was transferred from the IRS, and the result will be used in the calculation of the applicant’s EFC.
Verification Requirements: Since neither the information from the FAFSA-IRS Data Retrieval Tool nor an IRS Tax Return Transcript will include the tax filer’s “Rollover” notation, to verify the amounts that should be included on the FAFSA, the institution must obtain a written statement from the tax filer indicating the amount of the distribution that was excluded because it was an authorized IRS rollover. Acceptable documentation could be a signed statement from the tax filer. Acceptable documentation could also be a notation by the tax filer on the IRS Tax Return Transcript that includes the word “Rollover” beside the applicable item(s) on the transcript, similar to the instructions provided for the IRS Form 1040 or 1040A. If the institution accepts as documentation of the rollover a notation on the IRS Tax Return Transcript, it must ensure that the notation is signed and dated by the tax filer.
If the IRA or pension distributions were the only tax information that was changed for tax filers who used the IRS DRT, an institution should accept from the tax filer a signed statement confirming that the IRA or pension distributions included a rollover. A tax transcript would only be necessary if other IRS tax information was changed. [Guidance issued 05/04/2012; revised 12/08/2017]