14 Jan What income and assets are reportable on the FAFSA?
Q. I’m completing the FASFA for my son. I get a monthly pension from my deceased father’s employer. Is that reportable? Also I have my own business. My income is below where I should be eligible for the simple form but they are asking for my assets. I file a Schedule 1. Is this why? Will they still disregard assets because I qualify for simple form?
A. The Free Application for Federal Student Aid (FAFSA) does ask for a great deal of financial information from parents.
We assume your son is your dependent, and that’s why it’s asking for parent information.
There are no income requirements or caps to the amount of earnings to qualify for federal student aid, said Gerard Papetti, a certified financial planner and certified public accountant with U.S. Financial Services in Fairfield.
He said numerous factors go into the financial aid determination, such as the number of children attending college, parents’ income, assets and more.
Information on income as well as assets is used to calculate what is reasonable for the family to contribute to the student’s college education, Papetti said. This is known as the Expected Family Contribution (EFC).
“The EFC is calculated based on the parents’ adjusted gross income (AGI) which includes all sources of taxable income such as wages, taxable interest and dividends, capital gains, business income as well as pension and retirement income,” he said. “FAFSA also requests information on any untaxed income such as child support.
In addition to income, the FAFSA requests information on bank savings and checking accounts, investment portfolios, real estate investments other than your primary residence as well as business assets, he said.
“As for your specific question, the pension you are receiving from your deceased father’s employer if included in your AGI would be reportable on the FAFSA,” he said. “FAFSA can retrieve information directly from your tax return you filed with the IRS if you elect.”
But as we have seen this year, some FAFSA filers will face challenges with that direct IRS information, called the IRS DAta Retrieval tool. Because of changes to tax forms from the new tax plan, some filers will be unable to use the tool and need to enter the information manually. You can learn more about that here.
As for your question regarding the “simple form,” we’re assuming you are referring to the IRS 1040. Papetti said filing the simple form or Schedule 1 does not have any impact on the information you are required to provide when completing the FAFSA.
Email your questions to moc.p1611094172leHye1611094172noMJN1611094172@ksA1611094172.
This story was originally published on Jan. 14, 2020.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.