1. Not claiming a son or daughter on a parent tax return does not make that son or daughter independent on the FAFSA and as a result not requiring parent income and assets to be listed. Dependency on the FAFSA is determined by the FAFSA dependency questions. Also, not living with parents and paying all your own bills as a student does not make the student independent on the FAFSA.
2. Some parents and students that ICAN encounters think they really do not need the physical tax return or W-2s. Yes, the data retrieval tool (DRT) is a handy mechanism to import tax information electronically. But success with the DRT depends on entering the physical address on the DRT as it appears on the tax return. ICAN advisors really prefer the tax return be available along with the W-2 forms. Also, tax returns allow ICAN advisors to list income from work for parents or spouses involving business income and farm income.
3. W-2 forms (Wage and Tax Statement) helps an ICAN advisor to split up income from work, in this case wages, between two parents or spouses. The W-2 also shows tax deferred payments to retirement savings plans that are required on the FAFSA. That information is displayed in Section 12 of the W-2 form. In Section 12, if a payment is listed with a letter code of D, E, F, G, H, or S, then that must be listed on the FAFSA as a tax deferred payment to retirement savings. The W-2 is very important; do not throw it away!
4. When a student gets married, the question on the FAFSA reads, “What is your marital status as of today?” For parent marital status, the question reads asking the student, “As of today, what is the marital status of your parents?” The “as of today” indicates the marital status on the day that you are completing the FAFSA. Often it is confused with the idea that we were not married in the tax year that applies to the FAFSA. That is incorrect. It is “as of today” or the day you are completing the FAFSA. If in the tax year the parents or student and spouse did not file a tax return together, the financial information is added together and entered on the FAFSA. In the case of a parent who remarries, both the biological parent and stepparent are entered on the FAFSA if they are married on the day the FAFSA is completed.
5. In a divorce situation, some parents think that the tax return determines which parent should be on the FAFSA depending on who claims the child as a dependent. That is a not correct. Determining which parent should have their information on a student’s FAFSA is directed by these two guidelines. First, who did the student live with the most over the past 12 months? Second, if the living time is exactly even, then which parent provided the most financial support or the most recent support when the student received financial support from a parent?
6. Some parents believe that if they claim a son or daughter on their tax return as a dependent, then that son or daughter cannot file their own tax return. That is false! A student can file on their own even if claimed as a dependent by their parent(s). They should do so if the employer withheld federal withholding from the student’s paycheck and they will have no tax liability. That withholding is the student’s money, and the student will have to file a tax return to get a refund from the government.
ICAN offers free FAFSA assistance. To schedule an appointment call 877-272-4692 or go to www.icansucceed.org and click on Schedule an Appointment.
Steve - Southwest Iowa Advisor
