It’s that time of year when High School Seniors are applying to college and filling out the FAFSA (Federal Application for Financial Student Aid). It can be alarming when your child asks for a copy of your tax return and there are always questions about what they are doing with that info and how to get the maximum benefit. As someone who has put several children through college, I hope to help answer some of those questions.
The official FAFSA application from the Department of Education and some excellent instructions can be found here: https://studentaid.gov/apply-for-aid/fafsa/filling-out
Most students who fill out the FAFSA are hoping for a Pell Grant which provides financial assistance to some 5.4 million undergraduate students annually. Students who do not qualify for a Pell Grant may also qualify for a subsidized student loan or even a combination of the two. Since most programs are need-based, some parents try to avoid showing their income by not claiming their student as a dependent. THIS DOES NOT WORK! The rules for claiming a dependent are different for taxes than for FAFSA. A student will still be required to provide their parent’s tax info unless they are one of the following:
Age 24 or older as of the last day of the year.
Married and/or have a child of their own.
Orphaned or legally emancipated.
A veteran of the US armed forces.
When filling out the application, it is helpful to have a copy of your tax return handy since they ask for specific numbers from yours and/or your student’s tax return. Once the application is complete, FAFSA will require verification that the tax return was accepted by the IRS. A certified copy is not acceptable, so here are the available options to obtain those in order from the quickest first. (Please note that all these options are free.)
1. Direct transfer
After your taxes have been filed electronically, wait at least 3 weeks and log into your FAFSA application and select "make a correction". Once inside your FAFSA, navigate to the "Financial Information" section. Near the top of the page should be a blue button labeled "Link to the IRS". This link will take you from the FAFSA site to the IRS site and if successfully completed, will transfer your tax information back to your FAFSA automatically. You will still need to submit these changes before you log out of your FAFSA but by using this method, you will not need to submit any hard copies of your tax return transcript.
When you enter the address on the FAFSA application, it must match EXACTLY with the address on your tax return. The field is case sensitive and should not include any punctuation or special characters - For example, if your FAFSA lists “St. George” as your city and the tax return says “ST GEORGE” then the link will not match, and the transfer will reject.
Many taxpayers can get transcripts from the IRS website. Select “Get your tax record” and answer the questions carefully. New users will need to submit a copy of their photo ID. Once you are granted access, select “return transcript” for the appropriate tax year and send it in with your FAFSA.
(Note that both parents and students will need to login and obtain transcripts separately.)
If you are unable to access your account online, you can call the IRS at 1-800-829-1040 and ask to have the return transcript either faxed or mailed to you. Be sure to ask for a “return transcript” and NOT an “account transcript” as they are not the same thing.
(Note that hold times can be several hours.)
Finally, the transcript can be requested by mail using form 4506-T. Print this form from the IRS website or pick one up at our office. Once the form is processed, the transcript is usually mailed within a few weeks.
If you haven’t filed yet, or if your return is under extension, FAFSA will require a copy of the IRS extension form, with all W2s and any other accounting statements showing projected earnings and a signed statement.
If your return has been amended, then you will need to provide FAFSA with a copy of the IRS Form 1040X along with a signed copy of your original IRS Income Tax Return.
So, your student got their FAFSA and is enrolled, now what?
College is the source of some great tax breaks! Even when tuition is paid by a scholarship, there are tax benefits for having a college student as a dependent. Remember to talk with your tax advisor about these at the end of the year. They will most likely ask for form 1095-T, which does not always come by mail. Some schools require the student to login and get it online. Part of the college experience is learning to navigate bureaucracy and there is no better way to do that than through taxes.
While it’s true that tuition costs have been outpacing inflation, the financial aid and tax credits provide a way for almost anyone to obtain post-secondary education for little or no cost. Our hope is that this guide helps make the process a little easier and that your collegiate experience will lead you to follow your dreams!