Clarity’s New Enhanced Tax Verification Process Home

In this post, I’m going to outline how Clarity’s new enhanced tax verification process works currently, and how we anticipate that it will work throughout the upcoming financial aid season. Before I do that, I am going to take a step back and recap how tax verification has historically worked at Clarity.

Tax Verification at Clarity Up to Now

The way tax verification at Clarity has historically worked is:

1. Families fill out form 4506c during the application process
2. Once a family submits their application, we send those forms to humans at the IRS to review
3. Some number of days (or sometimes weeks) later someone at the IRS either approves the release of the family’s tax transcripts or rejects the request for any number of reasons

Recognizing Room for Improvement

While this process has worked well, there are some clear opportunities for enhancement:

• While average turnaround times tend to be about a week, they can vary, sometimes greatly. Also, even when the average is a week, there are some number of transcripts that take much longer to come back, often for no explainable reason. Ultimately the bottleneck here is how fast the human reviewers at the IRS are able to review forms, which is something we have very little control of.
• About 15-20% of families have at least one of their requests to release their transcripts rejected, primarily due to data mismatches between what’s entered in the form and what the IRS has on file. These families end up having to upload their tax documents for manual review.
• Families have to complete this process each year. A family could successfully complete the process one year and have their requests rejected the next year.

Introducing the Enhanced Tax Verification Process

We’ve recognized these opportunities for improvement for awhile — well over a year — which is why last year some of you may remember we tested the first version of this enhanced tax verification process. During that test, we had a relatively small number of families complete a form 8821 while filling out the application instead of a form 4506c.

There are a couple key differences between form 8821 and form 4506c:

• With form 8821, families can authorize the release of multiple years of taxes at once, meaning they only have to complete it once every three years.
• Form 8821 tends to have lower rejection rates.