FAFSA Form Guide: 2009-2010 FAFSA Application Step 2

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.

Start Your FAFSA - Financial Aid Application Form

Step #2: Your Student Finances

• This section is still about the student, not the parent or family.
• Question 33: 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 contest the results of your FAFSA later, having tax returns showing little or no income will help you.
  • Additionally, some federal tax refunds are universally available, like the Telephone Excise Tax Refund, but ONLY if you file.
• Question 34: For 2009, we strongly recommend filing a complete IRS 1040 form. Students should NOT use the 1040EZ as it lacks questions about tuition deductions and student loan interest, which can offset your adjusted gross income. Students may want to use a 1040A form, but that lacks some deductions that may apply to your personal situation, such as early withdrawal of savings. Consult a qualified tax preparation professional or accountant for the best possible tax advice relating to your individual situation.
• Tip: your local community bank or credit union may offer free or low cost financial planning. It's a good idea to take advantage of these services if available.
• Tip: If you withdrew money from a certificate of deposit or other time-deposit savings account prior to your certificate maturing (perhaps to pay extra bills or tuition), you may have incurred a penalty for early withdrawal. You'll receive a notice from the bank on a 1099-INT form; on your 1040 tax return, this can be used to reduce your adjusted gross income a little more.

From here on out, we will be working on the assumption that you are filing the full IRS 1040 tax return, not the 1040A or 1040EZ.

• Tip: Be sure to print out and have the IRS 1040 form handy, even if you are filing your taxes electronically!
• Questions 36-38: If you have no taxes, you must fill in these fields with zeroes. Do not leave them blank under any circumstances!
• Question 36: Your adjusted gross income is line 37 on the IRS 1040. Note that previous lines have deductions for tuition and fees, student loan interest, moving expenses, and other offsets that may reduce your adjusted gross income. This in turn will improve your eligibility for financial aid.
• Questions 39-40: This is purely a question of wages. Rather than use the IRS 1040, use the number from Box 1 on your W-2 or your total raw pay from your pay stubs to answer this. Do NOT use adjusted gross income, total tax, or anything other than wages earned from work.
• Tip: 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.

Start Your FAFSA - Financial Aid Application Form

At this point in previous years, we would have referred you to the FAFSA worksheets. These are gone for 2009-2010.

• Tip: with this section, make sure you put 0 for any line where you have no answer. Do not leave any line blank.
• Question 41: This is an interesting question. The FAFSA data is as of the day you file it. Thus, if you're paying rent and have your monthly rent in your checking account, that pile of cash will count against you. If you paid rent the day before and there's nothing left in your checking account but crickets, that will work for you. Make sure you have as little cash in checking, savings, and other cash-equivalents as possible on the day you file your FAFSA.
• Question 42: The net worth of your investments includes real estate except for the house you live in, UGMA/UTMA accounts in your name (student's name), stocks, bonds, money market funds, etc. It's easier to say what is NOT included: retirement plans, life insurance, the house you live in. Some things, like 529 plans, are generally reported as parental investments rather than student investments.
• Question 43: If you own a small business with fewer than 100 employees or a farm, you don't have to report its net worth. You only have to do that for larger businesses or investment farms. For a lot of students, just put a zero here.
• Questions 44-45: If you're a veteran, report your veterans education benefits here. If you're a veteran and don't know what you should put in, talk to your education officer at the VA - they can help guide you to get the most money that you're qualified to receive.
• The next two questions are questions that used to be part of the worksheets from previous years. Remember, we're still in the student section, so answer questions from the perspective of the student, not the parent.

Question 46 is a five part question that used to be one of the FAFSA worksheets. It deals with additional financial information.

• Tip: with this section, make sure you put 0 for any line where you have no answer. Do not leave any line blank.
• Question 46a. More questions from the federal tax credit. Make sure you consult with a qualified tax advisor about which education tax credits you are eligible for.
• Question 46b. A question on child support. Make note that it does not include support for kids living with you in your household. This is a student question, not a parent one!
• Question 46c. Your taxable earnings from Federal Work Study will be listed on your pay stub.
• Question 46d. This is for taxable scholarship aid reported in your adjusted gross income. Scholarships are tax free if used at a qualified educational institution and is used solely for tuition, fees, and required supplies. Using scholarship funds for room and board makes that portion of a scholarship taxable income. Ultimately, what is reported as taxable or tax free is your responsibility; your safest bet is to engage the services of a tax professional if you're unsure how to handle the scholarship funds.
• Question 46e. Be sure you report the taxable portion of combat pay specified in Box 12, Code Q on your W-2. Do NOT use the amount from Box 1!

Start Your FAFSA - Financial Aid Application Form

Question 47 is a 10 part questionn that used to be one of the FAFSA worksheets. It deals with untaxed income. Remember that everything is still from the perspective of the student, not the parent or the family.

• Tip: with this section, make sure you put 0 for any line where you have no answer. Do not leave any line blank.
• Question 47a. This question deals with retirement savings usually administered by an employer. If you participate in a retirement plan of any kind at work, this should be on your W-2 form that you receive from your employer by the end of January of each year.
• Question 47b. This question deals with retirement savings usually set up by you or your parents. You should receive tax forms from those plans each year; once you've done your full IRS 1040, grab the number from line 28.
• Question 47c. If you have kids, this is child support that you, the student, have received to support your kids.
• Question 47d. If you've earned interest on things like tax free savings bonds or other tax exempt financial services, grab line 8b from your IRS 1040.
• Question 47e-f. If you have received money from a retirement plan (cashed out), report the appropriate data from your IRS 1040. It's important to note that if you have rolled over a retirement plan from one company to another, or one plan to another, the rollovers don't count - only cash in hand counts.
• Question 47g. If you receive any kind of stipend from the military, clergy, or other organization where you don't really get a salary, report that here.
• Question 47h. Detail your veterans benefits here. If you have any questions about veterans benefits, make sure you contact your VA education officer.
• Question 47i. Other untaxed income is kind of vague. Some examples shown are worker's comp or disability, but the more illustrative list is the list of what not to include, such as student aid (including scholarships), earned income credit, tax credits for kids, welfare, Social Security, workforce investment, combat pay, flex savings plans, foreign income, and most other tax credits like special fuels. Chances are most people don't have anything to add here - if you think you might, you'll want to consult a qualified financial planner.
• Question 47j. Did your grandparents pay for college or expenses? Any money someone else is paying on your behalf goes here. Use common sense for this question - if someone paid rent for you, it should go here, but someone buying you a Big Mac and fries can safely be excluded.

Start Your FAFSA - Financial Aid Application Form

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