"Yes; No; Don't Know?"
It is required (and beneficial) for families to complete the FAFSA as accurately as possible, and it may be your school's obligation to make necessary correction(s)!
Although most financial aid personnel do not wish to add another "to do" to their work list, there is no option to ignore documentation on file for a student. "If your school has conflicting information concerning a student's eligibility, or you have any reason to believe a student's application information is incorrect, you must resolve such discrepancies before disbursing SFA funds....." Application and Verification Guide, SFA, US DOE
With the "conflicting information" directive in mind, this article will address two different areas of the FAFSA. Responses to both of these areas have definite effects on the calculated EFC.
FAFSA 2002-03 question 42/43 and 76/77
"How much did you/your spouse and/or your parents earn from working (wages, tips, etc.) in 2001? This information may be on your/their W-2 forms or on IRS Form 1040-lines 7+12+18; 1040A-line 7; or 1040EZ-line 1. Telefilers should use their W-2 forms."
Although the responses to "income earned from work" are not listed as part of the five major data elements required in verification, corrections to these questions are required if the school has conflicting data on file (i.e. the student/parent tax forms).
The following four examples illustrate the direct impact of reported father/mother income earned from work to the resulting calculated EFC:
- Parent AGI = $38,223 (father income = $19,229; mother income = $18,247) verified/correct EFC = 1136
- Parent AGI = $38,223 (father income noted as $0; mother income noted as $0) incorrect EFC = 1875
- Parent AGI = $38,223 (father income noted as $38,223; mother income noted as $0) incorrect EFC = 1481
- Parent AGI = $38,223 (father income noted as $38,223; mother income noted as $38,223) incorrect EFC = 808
FAFSA 2002-03 question 38/72:
"If you have filed or will file a 1040, were you eligible to file a 1040A or 1040EZ? 1.Yes; 2.No; 3.Don't Know" ...See Page 2 FAFSA instructions for assistance.
The response to question 38/72 can, indeed, make a big difference in the Expected Family Contribution. Pell eligibility or no Pell eligibility can be the result of the student/parent response. The "don't know" answer is computed the same as a "no" response and the resulting non-simplified calculation can drastically change eligibility.
The following two examples are actual/verified scenario from 2002-03:
Family A (family size = 2):
Parent filed a 1040A 2001 tax form; AGI less than $9,000 (all from other than income earned from work); untaxed social security benefits less than $15,000. (Parent assets were negligible.)
Student filed a 1040; "yes" eligible to file 1040A; AGI less than $14,000 ($4500 income from work; $500 taxable interest; $8800 taxable pension/annuity); untaxed pension/annuity $5000); untaxed social security benefits less than $4000. (Student assets were less than $125.)
Total parent/student AGI plus untaxed benefits = approximately $42,000
Verified EFC=0.
EFC calculation with question 38 response of "don't know" = 9445 ...an incorrect calculation.
Family B (family size = 2):
Parent filed a 1040; NOT eligible for simplified tax form; AGI approximately $4000; Worksheet A total less than $13,500 (Parent assets were negligible.)
Student filed a 1040EZ; AGI approximately $8500; Worksheet C approximately $700; $0 untaxed. (Student assets were $0.)
Total parent/student AGI plus untaxed benefits minus Worksheet C = approximately $25,000
Verified EFC=2670
If eligible for simplified calculation, the EFC would have been 0 ...an incorrect calculation.
Guidance?
The best guidance is to know at least the basics on tax form filing requirements. FAFSA page 2 instructions for questions 38/72 are quite simple: "In general, a person is eligible to file a 1040A or 1040EZ if he/she makes less than $50,000, does not itemize deductions, does not receive income from his or her own business or farm, and does not receive alimony. A person is not eligible if he/she itemizes deductions, receives self-employment income or alimony, or is required to file Schedule D for capital gains."
You can refer to page 19 of the IRS/1040A tax information instructions for more detailed information. Below is a portion for your reference:
- Who Can Use Form 1040A?
You can use Form 1040A if all five of the following apply:
- You only had income from the following sources:
- Wages, salaries, tips
- Interest and ordinary dividends
- Capital gain distributions
- Taxable scholarship and fellowship grants
- Pensions, annuities, and IRAs
- Unemployment compensation
- Taxable social security and railroad retirement benefits
- Alaska Permanent Fund dividends
- Qualified state tuition program earnings
- The only adjustments to income you can claim are:
- IRA deduction
- Student loan interest deduction
- You do not itemize deductions.
- Your taxable income (line 25) is less than $50,000.
- The only tax credits you can claim are:
- Child tax credits
- Additional child tax credit
- Education credits
- Earned income credit
- Credit for child and dependent care expenses
- Credit for the elderly or the disabled
- Adoption credit
- Rate reduction credit
You can also use Form 1040A if you received advance earned income credit (EIC) payments, dependent care benefits, or employer-provided adoption benefits, or if you owe tax from the recapture of an education credit or the alternative minimum tax.
Submitted by:
Rita Laumer, Augustana College
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