I don’t think schools are reporting applicants to the IRS. The school may not accept the documents and won’t award the aid, but they aren’t following up with the IRS that there may be a problem.
“Federal law says that a dependent student (based on the federal financial aid definition) whose parents (both mother and father) have permanently ended all financial support of the student and refuse to complete the parent section of the FAFSA, may be eligible for ONLY a Federal Unsubsidized Direct Loan at the dependent yearly loan limits. No other aid is allowed.”
^ Which doesn’t seem to be the case with the OP.
Right! The student is living with the parents.
Can the student move in with his dad now, and then do a gap year…and then apply with dad’s info.
@kelsmom What should this student do? Take a gap year? Apply where he could get huge aid? What?
@mom2collegekids - I was thinking the same thing. It seems like the most straightforward solution. OP just needs to get clear from mom and stepdad’s shenanigans. Solutions that require the OP do things which would risk exposing mom’s fraud are imposing an emotional burden that few 18 year olds can shoulder.
Yes, the student needs to steer clear of this.
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According to the IRS, many married couples commit fraud to get the EITC. The couple divides up the kids, and each parent files as Head of Household. The IRS estimates around one quarter of EITC payments are paid as the result of error or fraud. <<<
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This sounds like what’s going on. Each parent has a child on his/her “head of household” taxes to get the EITC. And it sounds like the stepdad has this student on his taxes…which raised a red flag to the FA office because he’s not a bio parent.
If that’s what’s going on, then each year, this family is getting $9k-12k+ in tax credits that they wouldn’t otherwise get. If this has been going on for a few years, they could owe $50k+ plus penalties.
If that’s what’s going on, the parents aren’t going to “come clean”.
^and they are doing this using the same last name/address?
Her mom’s birth certificate would have her last name on there . And if it the same then they would not have to be married
I have first hand experience with hundreds of instances of this. The IRS has no data regarding anyone’s marital status. Many will use a secondary address, but plenty don’t even bother with that.
There is big money to be had and there are never any criminal charges brought against those that do get caught. EITC fraud is a pretty easy way to steal 5-10k a year and it doesn’t land you in jail the way theft does.
Our tax dollars at work!
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EITC fraud is a pretty easy way to steal 5-10k a year
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And that’s why the parents, if this is the issue, will not correct this. It’s not just a one year loss…it’s past years pay back and future years loss.
My sister and her now husband did this legally for many years. They had two children, each took one as a dependent and filed HOH. They weren’t married, that was their status.
Now that they ARE married, they actually have two homes, each a primary residence for one. The IRS doesn’t seem to care.
Taking a gap year won’t help because this year’s FAFSA is based on 2015 taxes anyway. I don’t think there is any way to get the parents to be able to fix this without admitting to the fraud. In my opinion the child should ask them to take out whatever type of loan they can get at whatever rate and that he will pay them back on the same terms he would have paid back the $5500 he should have been entitled to.
Taking a gap year CAN help if the student:
Applies where he’d get huge merit
Possibly move now to live with bio dad so that he can use bio dad’s info on his FAFSA.
Living with bio dad will only help if the school is a FAFSA ONLY school…and does not require non-custodial parent financial information.
“My mom and step dad have said on their taxes for years that they are unmarried and living together. Except they are legally married. I’m applying for financial aid and my parents taxes reflect what I said on my fafsa-”
Wonder what he put on the college application, Common App or other.
Considering the alternatives, getting into a FAFSA-only school after a gap year with dad seems like it would be a huge win. If OP is a rising high school senior now, then after a gap year the student would enter college in the fall of 2018 which would use the 2016 tax return. So a gap year will work even with the new FAFSA tax year thing.
^^^
Exactly.
But, assuming that the bio dad can’t/won’t contribute anything (since he hasn’t been mentioned), using the dad’s info (correctly, moving in with him) might only work if the student applies to huge merit schools, or if the dad is low income, applying to instate publics if the state provides great aid w/o NCP info.
And remember that if the student applies to Profile schools that require non-custodial parent (and spouse) financial info…even if he lives with dad, mom (and spouse) will have to complete their forms.
If the student moves in with dad, takes a gap year and reapplies to schools that gives huge merit for stats, hopefully he’d realize NOT to apply to schools that require NCP info…or only apply to those schools if he were to get huge merit w/o FA info…and then only needed to file FAFSA for a small student loan.
If all he needs is huge merit (w/o filing FA), and a small student loan, then he’d never have to file CSS.