How do financial aid offices know you're sending in real tax returns when they ask for verification?

When a student gets selected for verification, what's to stop someone from submitting a fake tax return? The financial aid offices don't have access to IRS information. Also, if someone is a single parent and earns about $50,000 a year will financial aid be drastically reduced if the income was $11,000 the previous year?

The US Department of Education audits the schools to make sure the schools are verifying properly and that the money the school is given to assist need-based financial aid is being apportioned properly. When a student (and parent if dependent) sign the FAFSA that is an agreement that no false information will be given knowingly. On the front page of the FAFSA it states: "WARNING: You must fill out this form accurately. The information that you supply can be verified by your college, your state, or by the U.S. Department of Education.
You may be asked to provide U.S. income tax returns, the worksheets in this booklet and other information. If you can't or don't provide these records to your college, you may not get Federal student aid. If you get Federal student aid based on incorrect information, you will have to pay it back; you may also have to pay fines and fees. If you purposely give false or misleading information on your application, you may be fined $20,000, sent to prison, or both." You can read the financial fraud act here http://frwebgate.access.gpo.gov/cgi-bin/...

If you read the fine print when you "sign" your fafsa, you will discover that you give the Department of Education permission to do several "data checks". The IRS is just one of these such checks. They will know if you turn in a fake tax return.

If someone is a single parent and earns 40K a year, the max amounts of student loans will be the same... so your loan money won't be reduced, as a matter of fact, the amount you are allowed to borrow should increase. Loan amounts increase as you go up in grade level.