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by doing this they would NOT be collecting data on assets and 401K deposits made with before tax income. That changes the ENTIRE formula and schools WILL ask for more info.
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Actually, if they are using data supplied by the IRS as indicated by the "want to use IRS data" button, the pre-tax 401K contributions are captured on your W2 (which the IRS matches up to your return). So it should be available for the calculation of EFC.
I think asset tracking will be more problematic though as I'm not sure that banks and other financial institutions are required to report balances (just interest income) to the IRS on an annual basis. It wouldn't be difficult though to require that of them, I guess.
Second homes and other non-IRS-registered assets would be problematic, I'm sure, so I'm guessing you'd have to either declare it or not, but that is true today as well. However, I'm guessing more than 80% of FAFSA filers don't have any of these assets.
Heck, if the IRS already collects all of this data, you'd think they'd have the ability to do most simple tax returns automatically and just present you a bill or check depending upon your taxes due.