FAFSA and student income

[MerryAtHope]

If a student has grant/scholarship income but not enough to have a filing requirement for federal or state taxes, is there a place for that income on the FAFSA form?

[MerryAtHope]

It's hard to find something specifically on this! I could find info saying to report income on W-2's even if the student didn't have to file. But the only references to this all seem to say what the form says--to report it if it's part of the AGI on the return. I tried calling the helpline which was a labyrinth of pressing numbers that never did get to a real person! Best I can tell is not to include it, but I'm not 100% confident in that answer, LOL!

[Granny_Weatherwax]

I have the same question.  :bigear:

[GoodGrief]

My oldest was in that situation. Did you get a 1098-T? We were able to include her on our tax form this year, and the info from the 1098-T is reported there. As far as the FAFSA, we did the IRS electronic validation thing. Some colleges want a copy of the tax form itself, but not all. I can't remember if there was a question specific to the scholarship on the FAFSA, but if they need the info, there will be a question about it.

[Granny_Weatherwax]

Hmmmm...I'm looking at the FAFSA now and it is so confusing.  DS does not have to file taxes as he is below the filing limit and did not pay taxes.  We checked the Will Not File Box on the FAFSA. Two questions later it's wanting to know if DS reported scholarship income to the IRS.  Well, the answer is no,  he didn't report it because he doesn't have to file.

 

Our accountant said to skip this question since DS is not required to file.

[Granny_Weatherwax]

Same dratted question is popping up on the CSS Profile.  It's asking for scholarship and grant income reported to the IRS.

[MerryAtHope]

My oldest was in that situation. Did you get a 1098-T? We were able to include her on our tax form this year, and the info from the 1098-T is reported there. As far as the FAFSA, we did the IRS electronic validation thing. Some colleges want a copy of the tax form itself, but not all. I can't remember if there was a question specific to the scholarship on the FAFSA, but if they need the info, there will be a question about it.

 

We did, but I'm not quite following how this helps. We elected to count some of DS's grant/scholarship money to go towards room and board rather than tuition. This allows us the tax break for tuition, but means that DS has some income. As this was his only income, and as it was less than the threshold, he didn't have to file tax forms. 

 

FAFSA makes clear that they want to know about income on W-2's, even if you didn't file. (I looked up the paper forms, and they have Question 32--if you're not going to file, jump to question 39. Then the instructions say: "Questions 39 and 40 ask about earnings (wages, salaries, tips, etc.) in 2015. Answer the questions whether or not a tax return was filed."

 

I wish they would be just as clear about the remaining questions! Specifically, 44d says this:

 

"d. Taxable college grant and scholarship aid reported to the IRS in your adjusted gross income. Includes AmeriCorps benefits (awards, living allowances and interest accrual payments), as well as grant and scholarship portions of fellowships and assistantships."

 

The paper form actually puts "reported to the IRS in your adjusted gross income" in bold.

 

Well...it's not reported to the IRS in his AGI because he doesn't have to file.

 

But if he did have to file, it would be. 

 

One would think, well, it's obvious, it's not reported so don't fill it out. Except that in the online version, they gray out a whole stack of questions when the student says they aren't filing, while they leave a bunch of others "live," which says to me--they want an answer. 

 

Clear as mud to me!

[MerryAtHope]

Hmmmm...I'm looking at the FAFSA now and it is so confusing.  DS does not have to file taxes as he is below the filing limit and did not pay taxes.  We checked the Will Not File Box on the FAFSA. Two questions later it's wanting to know if DS reported scholarship income to the IRS.  Well, the answer is no,  he didn't report it because he doesn't have to file.

 

Our accountant said to skip this question since DS is not required to file.

 

That's what I decided earlier today, so I hope your accountant is correct! 

[Joules]

 

 

"d. Taxable college grant and scholarship aid reported to the IRS in your adjusted gross income. Includes AmeriCorps benefits (awards, living allowances and interest accrual payments), as well as grant and scholarship portions of fellowships and assistantships."

 

 

 

I've been researching this to try to figure out ds's tax stuff.  I think the quote above only refers to "earned" grant or scholarship money, like graduate or undergraduate teaching or research fellowship, where you are working for the money.  Merit or need scholarships wouldn't fall under this instruction.

[Granny_Weatherwax]

I've been researching this to try to figure out ds's tax stuff.  I think the quote above only refers to "earned" grant or scholarship money, like graduate or undergraduate teaching or research fellowship, where you are working for the money.  Merit or need scholarships wouldn't fall under this instruction.

 This would explain why the accountant asked if any of DS's scholarships/grants were tied to his research project or his on-campus job or if the school had sent any other forms.

 

 

I guess I will share one thing that I learned this year.  DH and I paid off DD's unsubsidized loans including all interest.  We had hoped to be able to claim the interest on our tax forms.  None of us, neither DH and myself nor DD, can claim any of the paid interest.  We cannot claim it because the loans are DD's. DD cannot claim the interest because we claim her as a dependent.  It was a sizable amount; approx. 2.5 years of accrued interest.  The accountant said the best we can do is view it as a gift for DD and know that we helped her begin her post-college life with less debt.  Lesson learned.

[JulieA97]

Same dratted question is popping up on the CSS Profile.  It's asking for scholarship and grant income reported to the IRS.

The reason it asks this question is if you did report it as income to the IRS, they remove that amount from the student paid income.  Basically they credit it back to you as they don't actually include that amount against the student in the EFC calculation.

 

As it was not reported on a tax return in the AGI, you don't have to list it.

[MerryAtHope]

Merit or need scholarships wouldn't fall under this instruction.

 

So, what you're saying is that when I read this: "Includes AmeriCorps benefits (awards, living allowances and interest accrual payments), as well as grant and scholarship portions of fellowships and assistantships."

 

I should understand that to mean that the scholarship/merit income they are talking about in question 44d is *only* that which falls into these categories, and not other scholarship/grant income that would be taxable? (and, as Julie says below, that the only reason for including this income here would be so FAFSA/CSS can take it out of the AGI reported?)

 

The reason it asks this question is if you did report it as income to the IRS, they remove that amount from the student paid income.  Basically they credit it back to you as they don't actually include that amount against the student in the EFC calculation.

 

As it was not reported on a tax return in the AGI, you don't have to list it.

 

I think this is starting to make sense to me--if I look at all of the questions in 44, the taxable portion of merit scholarships/grants applied to the AGI would be offset by the education credits in 44a--so then you wouldn't want to mention that type of grant income in 44d (that would be duplicating the info). Since fellowships etc... are also taxable and you can't get ed. credits for those, but Fafsa/CSS wants to give the student a "deduction" by taking that income out of the AGI--they give the student a place to do that. 

 

So all of the 44 questions are not to get someone to report income, but to allow them a way to take that income back out of their AGI. If someone had a fellowship, they'd get a W-2, right? So then this would allow them to not have fellowship income keep them from getting aid again.

 

They could really make this clearer by simply labeling question 44 "deductions from income!" That would have saved me hours (and days) of searching for this answer (and a bit of worry over whether I was somehow being fraudulent!)

 

 This would explain why the accountant asked if any of DS's scholarships/grants were tied to his research project or his on-campus job or if the school had sent any other forms.

 

 

I guess I will share one thing that I learned this year.  DH and I paid off DD's unsubsidized loans including all interest.  We had hoped to be able to claim the interest on our tax forms.  None of us, neither DH and myself nor DD, can claim any of the paid interest.  We cannot claim it because the loans are DD's. DD cannot claim the interest because we claim her as a dependent.  It was a sizable amount; approx. 2.5 years of accrued interest.  The accountant said the best we can do is view it as a gift for DD and know that we helped her begin her post-college life with less debt.  Lesson learned.

 

Oh wow. That's a blow.

[MerryAtHope]

Incidentally--this ALSO means that there's an advantage to doing a work study program versus an off-campus part time job (looking at 14c). I never realized it made a difference, but it appears FAFSA would take that income back out too.