The draft version of the FAFSA can help you a lot in understanding the real difficulties that may stand in your way, when you are filing the actual FAFSA. In this section, we will use the draft version of the FAFSA to help you find answers to each and every question on the FAFSA. We don’t predict any major changes in the format of the questions, except for the changes implemented through DOMA, which have not been included in this version. Further, any reference to the Individual Retirement Accounts (IRAs), doesn’t relate to the educational IRAs (which are not retirement accounts and are now more commonly called Coverdell Education Savings Accounts). Let’s start.
Make sure that you fill a single form for one student. If you are filing the form for more than one student, then use different forms for all of them, even if all of them are applying to the same college. The easy part is that, if more than one child I applying from your household, then most of the information will be largely identical for all them.
When filling out question number 6, you must use proper abbreviation for your home state
If your child does not have the social security number, then you should try to get one immediately. If you can’t get the social security number in time before the deadlines, then you should call the need analysis company and explain to them the seriousness of the situation.
Remember to omit the dashes or spaces from the license number while copying it on the form.
If the child does not have the green card on the day when you file the form, but you can manage to have it by the time he/she starts the school, then you should contact the financial aid offices of the schools for instructions on how to proceed in that situation.
If the student is neither a U.S citizen nor an eligible non-citizen, then you may also have to complete special “international student” aid forms. The FAOs can provide you with the details regarding the international student aid forms.
For example, the date at which you became a legal resident must be listed as “03 2012”, if it is March, 2012.
Male students, who just turn 18 at the time of filing the FAFSA, should immediately go to the post office during their birthday week and register themselves. Registering for the Selective Service does not mean that you are expressing your willingness to serve. It is just the first step in the process of achieving conscientious objector status.
In the online version, this question will only be asked if you indicate you have previously received federal aid.
This question is designed to know about the annual borrowing limits for student loans, and it refers to the student’s academic standing at school; not the number of years for which he has been attending college.
You should make sure that the response to this question is appropriate. In response to this question, you must enter the grade level attained by the student at the start of the academic year, rather than the level which the student will attain during the year. For example, a student who will be a second semester sophomore in the fall term should use the response “2nd year undergraduate/sophomore” even though he/she will be a junior by mid-year.
The questions that we have discussed till now are just meant to yield basic information regarding the students. Now, we will move on to some advance level questions. Most of the questions of section 32-45 (intended for students) and section 80-94 (intended for parents), may look identical, but we recommend you to read the questions carefully, and answer all the questions. To make the situation simple, we have paired the identical questions from both the sections (section 32-45 & section 80-94).
If you are not sure about completing the questions in the purple shaded areas of the FAFSA (Parent related questions), then you must first determine the student’s dependency status.
The questions below are intended to determine whether the student is dependent or independent. You should know that the college wants all their students to be dependent, because the independent students are way more expensive for school than the dependent students, as the independent students usually require way more financial aid.
Establishing oneself as an independent is tough. If a student can answer “YES” to any of the question from Question 46 to question 58, then he is undoubtedly independent for federal aid purposes for the 2016-2017 academic year.
Recently, the experts in the field are able to find out more ways by which one can establish themselves as an independent, than they could a few years back. For now, if you can answer YES to any of the above questions, then you are an independent. The questions 49-50 and 53-58 are very crucial ones, and have a lot of fine print involved. So, one should read the questions as well as the notes related to the questions very carefully, before answering.
If your answer for all the questions from 46-58 are “NO”, then most likely the student is dependent, and you can skip the independent students’ questions (95-102) in step five of the form.
There is always some exception to the rules. If a student applies for federal aid programs under title VII of the Public Health Service Act, then they may have to give information about their parents even if they answered “YES” to the questions from 46-58. The FAO can be the best person who can explain you the details about the exceptions.
A few years back, establishing oneself as an independent was an easy way of getting more aid, and many parents were taking advantage of this loophole. But in the recent past, many changes were made to the rules by the federal government, which made the criteria of establishing oneself as an independent tough. Anybody, who claims himself as an independent, must provide extensive documentation to the financial aid office as a proof, such as a birth certificate (to prove that you will be at least 24 years old by January 1 of the academic year for which you are seeking aid). The schools have their own formula to determine the student’s dependency status, and the student must fulfil all the criteria, in order to be called as an independent.
In very rare circumstances, the FAO can choose to declare the child as an independent through professional judgement, even if the student does not meet the federal criteria.
The upcoming sections consists of questions which are meant to yield the financial information of the student and the parents. As we have already said, we are going to pair up the identical question from section 32-45 (Student’s financial information related question) and section 80-94 (Parents’ financial information related questions). For example, we will pair the question 36- adjusted gross income for the student, and question 85- the adjusted gross income for the parent.
If the student is separated, divorced, or widowed, and has not since remarried, then for all the spouse related questions, you are required to answer with a “0”.
If you are separated but continue to file your tax returns jointly, then you are required to mention only your share of the tax return, as it is going to appear on the joint tax return. The same holds true if you were recently widowed. Later on when you have to fill the form, you must mention only your share of tax return from the joint returns.
If the parents and/or the students have already filed the final version of the 2015 U.S tax return with the IRS (i.e. IRS form 1040, 1040A, or 1040EZ), then you must know about the IRS Data Retrieval Tool and the IRS Transcript Verification Requirement:
- The FAFSA on the Web (FOTW) may allow you to transfer your financial information directly from an IRS database, using an option called the IRS Data Retrieval Tool (DRT). This tool simplifies the FAFSA, and along with that you can be confident about the accuracy of the data, as it will be directly taken from the IRS database
- You should never miss the FAFSA deadlines even if your taxes aren’t done or you are unable to use the DRT. Before the DRT can be used, it is going to take you at least three weeks, if the returns were filed electronically and up to eleven weeks if the return was mailed.
Even if you are going to estimate on the form, you should at least figure out which IRS form you are going to file in the future. If you don’t qualify for the 1040A or 1040EZ form, or don’t know if you are eligible or not, then you will automatically get disqualified for the SNT or Automatic Zero-EFC.
You should answer “YES” to question 35, if you were eligible for the 1040A or 1040EZ form but you chose to file the 1040 form.
Questions 34 and 82 have not been asked on previous year’s versions of the FAFSA.
If you have filed, or will file, a foreign income tax return, or a tax return for Puerto Rico, or certain U.S. territories (such as Guam, American Samoa, the U.S. Virgin Islands, Swain’s Island or the Mariana’s Islands), or one of the freely associated states (i.e., the Republic of Palau, the Republic of Marshall Islands or the Federal States of Micronesia), then you must read the notes related to the corresponding states in the FAFSA instructions, and answer them accordingly.
If you have not yet filed your taxes, then it is the time for you to use all your tax strategies and the methods to make your AGI look as small as possible.
Carefully save all the files and documents, and keep your previous year’s tax returns with yourself copy for help. Also, keep a blank copy of this year’s federal tax form. This will help you in case some changes have been made to the tax law, or in the line numbers for the various items on the tax form itself.
If you are estimating the numbers, then you should not mention the exact amount that your employer has withheld from you. It may be less or more. Every year, we see at least one family who put down “0” for their U.S. income tax paid, because they received a refund. The amount of federal taxes you paid will be deduced in the aid formula, so it’s in your interest to report all of it. The lesser tax returns you have reported, the lesser the aid will become. We have not seen a need analysis company who has reported this kind of errors to the parents, through which their aid could have increased.
**Remember to exclude the self-employment tax.
Even if you have not got enough time to calculate your income tax return estimates, you can still take some help from your accountant, as he can help you with the estimate of your tax liability. While seeking your accountant’s help, keep a check on the procedure he/she is using to calculate the estimate. If he asks you to shift the assets in the child’s name, then show him the section of this book which shows the flaws in doing so, and ask him to rework on his idea.
If you do your own taxes, then you will be in effect creating a pro forma tax return, which you will be able to use (with some minor adjustments) once you have received all your W-2s and 1099s in the mail.
- Father’s taxable wages, salaries, tips, etc.
- Mother’s taxable wages, salaries, tips, etc.
- All other taxable income
- Adjustments to income
- Itemized deductions (or the standard deductions)
- Number of exemptions multiplied by $3,900
The result will be the estimate of your taxable income. After you have calculated the estimate of your taxable income, it is time for you to check the federal tax instructions to calculate the estimated tax on that income. If you are eligible for any tax credits, then deduct them from the estimated taxable income. This final result will be your answer for the question.
**If you are subject to the AMT, then you should add the additional tax to your estimate.
If your child earns very well, and is also a full time student for at least five months (may it be partial months) in a given tax year, then you can still claim him to be dependent on your tax return, but only until he is 24 years old.
Obviously, most of the parents will be earning more than their child, so they will be better off putting “0” in the child’s exempted parts of the form and his tax returns. The Parents can also add their child’s exemption to the parent’s exemption box.
In most of the cases, higher social security tax will lead to decrease in the family’s contribution. So, you should include every possible income, such as: wages (line 7 from the 1040 or the W2), business and farm income from schedules C and F (lines 12 and 18 on the 1040), income from non-limited business partnership (listed in Box 14 of the K-1 for the IRS Form 1065 for the partnership), and- for tax filers only- contributions to tax-deferred annuities (which can usually be found in boxes 12a-d of your W-2 form [codes D, E, F, G, H, and S], or possibly on your year-end pay stub). If applicable, then you should also include the total amount of combat pay received as a member of the U.S. Armed forces.
You should not include any losses incurred from the business, as it will underreport the amount of social security tax paid. The answer to the questions 88 and 89 (summed up) may not necessarily be equal to the answer to question 85 (your adjusted gross income). The same holds true for 39 and 40: and these should not necessarily equal 36.
Make sure that you do not include the retirement provisions, such as the IRA accounts in the total value. The assets in retirement accounts are protected from assessment.
Real estate is considered as an investment for the purpose of the FAFSA. Read the FAFSA instructions to know about all the kind of assets that should be included in the investment. In your response to the questions that ask about the investments, business, and investment farms, you have to list the “net worth” (net worth= current value – current debt) of the same. If the net worth of any of them is negative, then you should answer it with a “0” in the far right box. You cannot deduct credit card debt from the value of your assets, and only the debts secured by the assets should be included in response to these questions.
While you list your assets and your child’s assets, you should take care that you do not include any same asset twice.
If you have set a bank account in trust of your child, and if your (parent) social security numbers has been listed as the taxpayer I.D., then the asset in the bank account should be included as the parent’s asset, and not the child’s asset. Any asset registered in the child’s name, or in the parent’s name as the custodian for the child (most likely in a regular UTMA or UGMA account) will be assessed severely.
If the student chooses to skip reporting parental information on the form, then all the assets in the student owned 529 accounts or Coverdell Education Savings account should be reported as a part of student’s investment in the question 42. And, if the student chooses to report parental information on the form, then any asset in the student owned accounts must be reported as the parental investments in question 91, and not as a part of the student’s assets.
The net worth of the passbook loan must be reported as a part of “investment” instead of “cash, savings and checking.”
Primary residences do not count as a part of the assets. If you have got any real estate where you presently reside, but you have rented your primary residence, then it can be reported as part of the “investment”, but remember to report the net worth of the real estate (by net worth, we mean to deduct any mortgages, or any debts secured by the property from the value of the real estate.)
Farm-owners and Business-owners should feel a sigh of relief, as the business and farms are assessed at a very low rate. If you are a part owner of the business, then you must report only your share of the business. If your farm is your primary residence, and you can claim on schedule F of your 1040 form that you “materially participated in your farm’s operation”, then you can exclude the net worth of the “family farm” from the form.
The “Family business” can be excluded from the form. A business is considered to be a family business, if it has 100 or less full-time or full-time equivalent employees, and if the family (including relatives by blood or by marriage, such as siblings, step-parents, relative-in-laws, cousins, etc.) owns more than 50 per cent of the business.
The members of the armed forces, who received combat pay or special combat pay are required to report only the taxable part of those pay, and only if this part is included in the adjusted gross income on their tax returns.
Certain other incomes (such as untaxed social security benefits, welfare benefits, the earned income credit, the additional child credit, the foreign income exclusion, and the credit for federal tax on special fuels) that had to be reported on the FAFSA, prior to 2009-2010 version, are no longer considered to be income under the federal methodology.
These are the other untaxed income categories:
Child Support Received: The amount you receive during the year under the child support provision has to be mentioned here. Remember to list down the exact amount received, and also the amount that was promised.
Deductible IRA contributions: As we know, not all IRA contributions are necessarily deductible. If, you (and your spouse, if married) are not active participants in any employer or self-employed retirement plan, then for 2015, IRA contributions are fully deductible, up to $5,500 per person maximum (up to $6,500 if age 50 or older). If you (or your spouse, if married) are an active participant in a retirement plan, then your contributions may be fully or partly deductible, depending on your income. To determine whether you qualify for a deduction in 2015, consult your accountant or the IRS instructions for the 2015 forms.
You must include only the tax-deductible portions of the IRA on the FAFSA worksheet, but they will still be considered to be untaxed income. The deductible IRA contributions should match with the line 32 on your 2015 IRS 1040.
Combat Pay: This is meant only for servicemen and servicewomen. Similar to the IRA contributions, any untaxed combat pay that you have received, can be excluded as part of 45(i) (if received by the student or student’s spouse) or 94(i) (if received by the parents)
If you choose to not report the tax-free income this year, and if it becomes a taxable income next year (as rules continuously keeps on changing), then it can become a very big problem for you. So, we advise you to report all the tax-free income that the FAFSA asks you to report.
Finally, we have covered almost all the crucial finance related questions. Now, we are going to go back and deal with the questions from the parent’s section (question 59-79 and 84), and then we will go to the questions 95-102, which are meant for the independent students.
Marital Status in this question refers to the custodial parent’s marital status right now. The options are:
Married/remarried- If the natural parents of the students are still married, or if they had divorced or widowed, and then had remarried, then you have to fill in the oval for “Married/ Remarried”
Never Married- If the natural or adopted parents never married each other, or anyone else, then fill in the oval for “Never Married”. Also, if the parents never married, but are living together presently, then you should fill the oval for “Unmarried and both parents living together”
Divorced- If the present status of the parent with whom the student lives is divorced, then you should fill in the oval for “Divorced”.
Separated- If the natural parents are separated, fill in the oval for “Divorced/ Separated”. The parents do not need to have a legal agreement to be considered separated under the aid formula. If the custodial parent was divorced or widowed, remarried, and is now separated again, fill in “Divorced/Separated”.
Widowed- If the custodial parent is widowed and has not since remarried, fill in the oval for “Widowed”.
If your answer to the question 59 was “never married”, “divorced/separated”, or “widowed”, then you will have to list down information about one parent only.
If the custodial parent has remarried, then you will have to report information about the custodial parent and the stepparent. Make sure that you have the correct information about the correct parent.
Age of the parent is asked in question 64 and/or 68 is to determine the asset protection allowance.
Make sure that you report the same name, as it is on the social security card for the question 61 and 65, otherwise there will be problems at the time of processing the data.
In theory, if you have got one child in college, then the parents have to pay the full amount of the EFC as a contribution towards the child’s tuition. If you have two child in the college in the same year, then the college divides the EFC between two, and comes up with a larger aid package to fulfil your needs. That means, the parents have to pay the same amount for two children, as they had to pay for one.
In addition, if the parents had not qualified for the aid with one child in the college, then they may qualify for the aid if their two children are in college simultaneously. This is also the reason to apply for the aid each year, even if you had not qualified for the aid the previous year.
Even if the parents are in the college, they cannot be included in the list. If the parent is attending college, graduate school, or some other post-secondary institution, you may have to personally notify the FAO about this condition. Some schools may take this added family expense into consideration, when they are reviewing your application materials.
The questions from 95-102 are meant for independent students. Questions 97-101 are again designed to know if you qualify for the SNT and Automatic Zero-EFC. Question 102 is similar to question 84 in the parent’s section. Rest of the questions are simple, and have to be answered in the similar way as in the case of dependent student.
Let us now proceed to some other important questions of the FAFSA
You should make sure that you also write down the specific branch or division of the school. Take great care in doing so.
If you intend to apply for more than four colleges, then first, you should list down those four college that have got earliest FAFSA deadline. After your FAFSA will be processed, you can have the data sent to all those colleges, which you were not able to list on the FAFSA.
At the far right space, you must list the correct housing code for each school. If you aren’t sure, then fill in the “on campus” oval response, since the cost of attendance will be higher if you are living on campus.
The FOTW filers can list up to ten colleges. The online method of filing has got very feeble chances of mistakes. When you input the code for any college, then at the side, the name for the college will appear. By this way, you can make sure that you have entered code for the right college.
Along with the name of the school, you are also given the option of choosing the housing status for each school. If you are not sure about the housing status, then use the “on campus” response since the cost of attendance will be higher if you re lining on campus.
If you want to apply for more than ten colleges, then you must list the first ten colleges with earliest FAFSA deadline. As in the case of PDF and Paper versions, the FOTW filers can send their data to other colleges, after the FAFSA has been processed. (No matter what, if you are applying for any college within your state, then you should list the name of that college in the first round itself)
By simply signing on the FAFSA form, you are applying for all the types of federal aid, including the Pell Grant.
The initial date for signing and mailing in this form is January 1, and not a minute before that date. For the question 104, enter the date and the year very carefully.
The FOTW filers are also required to sign the form. One can do this by printing a signature page and mailing the signed page to the processor, or by electronically signing the form using a unique PIN number obtained through www.pin.ed.gov.
One can choose to apply for the Pin beforehand through the website, or apply for them when you are ready to submit your FOTW data.
Even if you face any difficulty in availing your PIN, you should still send the FOTW to the processor, and then try for the PIN. Although the processor won’t process the data until it has been signed, still it will consider the form to be received on that date. Once you get the PIN, then you should log in and “sign” the form.
The student and the parents/stepparent must sign the form electronically. After you have signed the form with PIN and submitted the data, click on the “Exit” icon on the confirmation page to check the status of your form. A message will pop up, which will indicate all the signature requirements have been met.
People who fill out the form on their own should skip this question.
The FAOs clearly hint that involvement of any other person in filling the form will make the form a subject to close observation.
Finally, that is all you have to do for the FAFSA. If the colleges to you have applied for doesn’t require the PROFILE form, then your work is almost over.
Additional Documents Demanded by the Colleges (Documents for Verification of FAFSA)
When the college finds the need to verify the information on your FAFSA, they may ask you for some additional documents related to your income and other financial information (the ones that you have entered on the FAFSA). If the college demands certain documents from you, then you are bound to present them to the college, or the college has the authority to withhold your financial aid offers.
The situation for verification of your FAFSA may occur due to various reasons. For example, if the Social Security Number for the parent or the student is either missing or wrong, or somewhere the calculations are incorrect, etc., then your FAFSA will be selected for verification. The colleges follow a particular rule to select the FAFSA of the students for verification. The college determines if the FAFSA of a student shows any conflict of information in the data provided. If they find any conflict, then they set that particular FAFSA aside for verification.
- Apart from the verification purpose, you may be required to provide some additional documents to the college for the following circumstances:
If you need the college to know about any special circumstance like some expenses that had occurred after filing the FAFSA, or the expenses that you had forgot to mention in the FAFSA, then you may need to provide sufficient documents to prove the expenses.
- If you have applied to a college that requires you to submit the non-custodial PROFILE, and your non-custodial parent does not co-operate with you, then you will have to present specific documents like evidence of non-payment of child support. The college may provide you with a Request for Waiver of Non-Custodial parent information that has the information regarding the acceptable documentation. You may also have to provide a letter of support from a qualifying individual, who has the knowledge about the condition of dispute in the family.
- Since all the males (only U.S. citizen) above the age of 18 are required to register with the Selective Service, the federal government conducts a database check for the FAFSA filers. If you are exempted from registering for the Selective Service, you may be required to provide the college with a copy of the Status Information letter.