FAFSA Help Guide:
Financial Information

FAFSA Help Guide eBook

FREE guide on how to complete, and take full advantage of the FAFSA.

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Step #2 of the FAFSA Online Guide to the FAFA Form tutorial follows. If you have not read through step #1, we suggest you start with step #1. If you are ready to file your FAFSA form or Renewal FAFSA form online, then please click here.

Be sure you've got the sample FAFSA worksheet printed out!

For this section of our FAFSA guide, we strongly recommend filling out the IRS federal tax return form for the student. Even if you are going to use a tax preparation specialist or file your taxes electronically, having this worksheet handy will be a huge timesaver and reduce the number of potential mistakes you could make.

Luckily, we're pleased to provide you with the 2007 IRS 1040 form in PDF format. Print it out, fill it out to the best of your ability, and have it handy.

Step #2: Let's Talk About Money

• This section is still about the student, not the parent or family.

• FAFSA Secret

  Reduce Your Adjusted Gross Income

  Lowering your AGI will help you qualify for more federal financial aid. We'll tell you why and how to do it.

  Question 32: selection c is always the wrong answer. You should always file a tax return, even if you don't have a job, income, or anything. Filing tax returns of $0 is actually a good thing, because it's additional documentation that you have no money, and therefore demonstrate need. If you need to conteset the results of your FAFSA later, having tax returns showing little or no income will help you.
• The best answer is b, because ideally you will file your FAFSA as close to January 1 as possible.
• Be sure to select the correct tax return in Question 33. Chances are if you make less than $100,000 a year, you don't itemize deductions, you're not self employed, and you don't receive money from alimony, then you'll use either the 1040A or 1040EZ form. This also applies to Question 34.
• Recommendation: your bank or credit union may offer free financial planning. It's a good idea to take advantage of these services if available.
• Question 35: Adjusted gross income - remember, this is line 37 on the IRS 1040 form for 2006. Want to learn more about how to reduce your adjusted gross income? Try this FAFSA secret!
• Be sure to print out and have the IRS 1040 form handy, even if you are filing your taxes electronically!
• Likewise, your income tax amount is line 57 on the 2006 IRS 1040 (Question 36).
• If you have no taxes, you must fill in these fields with zeroes. Do not leave them blank under any circumstances!
• Questions 38 and 39 (38 if you're single) deal with income that you made while working. This corresponds to the sum of lines 7, 12, and 18 on the 2006 IRS 1040, NOT your gross income or any other computation.
• If you're tangled up in your taxes, this is the point at which we strongly, strongly, strongly recommend that you use the services of a qualified tax preparation specialist.

Intermission: the FAFSA worksheets (page 8)

• FAFSA Secret

  Get Rid of All Your Cash

  Here are some strategies (some more ethical than others) to dump cash quickly before completing your FAFSA.

  At this point you'll need to refer to the last page of the FAFSA packet, the Worksheets page. Complete the worksheet for the Student/Spouse side (left side) for now. This is the yellow column on the worksheet.
• You'll note, by the way, two important lines in the worksheets: money received, or paid on your behalf, not reported elsewhere. Ideally, this is zero. The last question on the page references student grant and scholarship aid reported to the IRS. This is another reason to complete the FAFSA as early as possible, before any scholarship awards roll in for that year.

Back to Step #2!

• Now we're getting into the hardcore stuff. Question 43 asks how much the student has on hand in terms of liquid assets. Cash, checking, and savings accounts. Guess what the best answer for this question is? Zero. If it's not zero, make sure it's zero by the time you file. What to do with that cash? Find out with this FAFSA secret on eliminating assets!
• For this question, it's also important to note that it is as of the date of the FAFSA filing, meaning you have the opportunity to move these assets prior to filing the FAFSA and still be legally in full compliance.
• Question 44: this is an important one as well - the ideal situation from a federal financial aid perspective is for a student to have no money whatsoever. Why? Read why in this FAFSA secret.
• Note that your net worth, at least for financial aid purposes, cannot be negative. Zero is as low as you can go, so zero is the goal.
• Deal with bad investments using this FAFSA secret!

Move on to FAFSA Form Step #3 »