Filed return and updated FAFSA with DRT.
Just found out today from DH that the “rollover” was actually a conversion. He gave me the wrong account when I was filing out the taxes. 
So, I am going to have to do an ameded return. Does anyone know how this will affect the FAFSA? Also, we already had one school ask for a verificaton, so again wrong information reported there too.
How bad is this going to mess up my two kids financial aid reports? Right now they both get Pell and state grants.
The problem is that it is up to each college to determine whether a Roth Conversion should be left in as income, or taken out. There is a federal “Dear Colleague” letter suggesting that colleges consider excluding Roth Conversion income, but lots of colleges do not seem to follow that. Particularly as a low income family (which I assume you are since your kids are getting Pell Grants) this could cause a LOT of trouble.
Probably the easiest solution would be for your husband to recharacterize the conversion, and turn the funds back into a regular IRA.
And discussing the ramifications of financial steps like these with each other before doing them would be helpful.
Wishing you luck.
" And discussing the ramifications of financial steps like these with each other before doing them would be helpful."
I called the bank before going over and asked what we needed to do. IRA was in a CD. Was told just to come over and they will issue me a check. (could have taken the info and done it right there, but was not told this)
So we come home w/ a check and DH called the institution we were going to put the funds into, told the guy we wanted a rollover, and DH proceded to fill out the paper work, with the guys help, and not once did he mention it would not be a rollover, but a conversion in that particular account.
I am constantly amazed at the number of people being paid to do a particular job who really aren’t very good at it. And even asking the right questions doesn’t always get you the right answer.
I have looked into a recharacterization, but someone told me that may hold up the FAFSA aid determination and the kids might not get any Pell or state grants.
But I have to do an amended either way. Will that cause them to lose their fed/state grant money?
Who would I even talk to about the best course of action to take here? Would the individual colleges’ financial aid offices be of any help?
Provide some numbers - no one can tell you if it will cause loss of Pell without numbers. What was your EFC before? How much was converted?
How much was converted, but specifically, how much interest was considered earned, or was the entire amount considered earned?
Yes, the entire amount was considered taxable.
The SAR drops the Pell grants by $1400 and should drop the state grant as well. We had an EFC of $1400 originally. I realize to many here that is chump change, but it is money we have to come up with, and we were barely going to cover DS’s college costs as it was.
Someone told me to call the respective financial aid offices at the schools.
Again, someone told me just doing the recharacterization and ameded tax return will halt the grant awards. So my kids might lose all of it.
Is that possible?
I’m not really worried about the tax retrun, amended returns happen all the time, it’s the affect it will have the FAFSA that is my main concern. Without that grant money, my kids won’t be going to college next year.