On October 29, 2026, Federal Student Aid (FSA) updated Electronic Announcement GENERAL-23-118 to outline changes to how individuals who file income tax returns with both the Internal Revenue Service (IRS) and Puerto Rico or another U.S. territory report their financial information on the Free Application for Federal Student Aid (FAFSA®) form.
Beginning with the 2027–28 FAFSA form, dual tax filers will be able to report their combined income and tax information directly, eliminating the need for financial aid administrators to manually override IRS-transferred tax information when the information is correctly reported.
The change is intended to improve the accuracy of financial aid calculations and reduce the administrative burden associated with processing FAFSA applications for dual tax filers.
What’s Changing for 2027–28?
The 2027–28 FAFSA form includes a question allowing applicants and contributors to indicate whether they have filed or will file an income tax return with both the IRS and Puerto Rico or another U.S. territory.
Individuals who answer “Yes” will be prompted to manually enter their:
- Combined adjusted gross income (AGI).
- Combined income taxes paid.
If federal tax information (FTI) has already been transferred from the IRS through the FUTURE Act Direct Data Exchange (FA-DDX), the manually entered combined financial information will override the IRS-transferred values.
The FAFSA Processing System will then use the combined information to calculate the student’s Student Aid Index (SAI) and Federal Pell Grant eligibility.
This change specifically applies to individuals who file tax returns with both the IRS and a U.S. territory. Individuals who file only with a U.S. territory’s tax authority must continue to manually report their financial information on the FAFSA form.
Changes for Financial Aid Administrators
Under the previous process, financial aid administrators were required to use the professional judgment flag on the Institutional Student Information Record (ISIR) to override IRS-transferred tax information for dual tax filers.
This was a technical workaround necessary to ensure that income and taxes reported to both the IRS and a U.S. territory were included in the student’s financial aid eligibility calculation. The use of the professional judgment flag for this purpose did not necessarily constitute an exercise of professional judgment based on special circumstances.
Beginning in 2027–28, financial aid administrators will no longer need to use this workaround when applicants and contributors correctly identify their dual filing status and report their combined financial information.
However, administrators may still need to use the professional judgment flag in certain situations, including when:
- An applicant or contributor fails to correctly identify their dual filing status on the initial FAFSA transaction.
- An administrator must override usable IRS-transferred tax information with manually entered financial information, including when exercising professional judgment.
When corrections are necessary, institutions should follow FSA’s established procedures for submitting corrected information through the FAFSA Partner Portal or Electronic Data Exchange (EDE).
These corrections will generate a new FAFSA transaction and ISIR reflecting any changes to the student’s Title IV eligibility.
What This Means for Institutions
The update addresses a longstanding FAFSA processing challenge for individuals who file tax returns with both the IRS and a U.S. territory’s tax authority.
Because the FA-DDX retrieves information only from the IRS, previous FAFSA forms could exclude income and taxes reported separately to Puerto Rico or another U.S. territory. This could result in incomplete financial information being used to calculate a student’s SAI and Pell Grant eligibility.
The new functionality allows dual tax filers to provide their combined financial information directly, reducing the need for institutional intervention and helping ensure more accurate eligibility determinations.
Institutions serving students from Puerto Rico and other U.S. territories should familiarize themselves with the updated reporting process, review their procedures for handling dual tax filers, and ensure financial aid staff understand when corrections and professional judgment flags may still be necessary.
For additional information, institutions can review FSA’s Electronic Announcement GENERAL-23-118, updated October 29, 2026.