I submitted my FAFSA two days ago and they calculated my EFC to be 2501, which I was pretty happy about considering I could get the Pell Grant and this is a number my family can afford. However, I was reading through here that your EFC should be about 1/4 of your parent’s AGI if income is below 100K; ours is ~61K. So is our EFC actually supposed to be around 15000??
My dad is self-employed, but the application said, from what I understood, not to report the net worth of our business if we have fewer than 100 employees (and Dad is the only one). We don’t have any assets, checking, savings, or investments that exceed their threshold of $24,800.
We have 6 in our household since my grandparents live with us, and I’m the very first in my family to attend college. If it means anything, we reported that paid slightly under 2K in income tax (1040 line 56 minus 46), no untaxed income, and 4 exemptions for 2015.
We linked our data to the IRS. Could it be that my dad is self-employed, and thus pays taxes separately, that our EFC is low? I don’t know if that contributes to the EFC, and I don’t want to not report anything that could be caught later and get me in trouble.
You will need to provide documentation that your family provides more than 1/2 of your grandparent income to list them as household members on your FAFSA. If they collect social security, and have Medicare, it will be hard to prove that.
Just be prepared. Your FAFSA will likely be selected for verification…so have your documentation ready. This means you will need to have documentation of your grandparents’ incomes, Medicare coverage…and ALL bills that you are paying with your money…all.
In the FAFSA EFC formula there is an income protection amount for parent income that depends on number in household. If you only claim 4 exemptions on the tax return, you might only be able to list 4 in the household for FAFSA, for reasons thumper stated.
Then there is a deduction for federal taxes paid, state taxes, and soc sec taxes. These allowances are subtracted from income before the available amount is calculated for EFC.
@mommdc@thumper1 Thank you. I just saw that my application was chosen for verification now that you mentioned it.
I find it a little ambiguous when they say “supported by >50% of your income.” I’ll provide all the documentation they ask for. I’ve been searching on the internet whether those people supported by more than half of your parents’ income have to be listed as dependents on the tax forms and have yet to find a definitive answer. We provide my grandparents with shelter, transport, (edit:food) etc etc so I don’t know how universities will take that.
I’ve talked to them and we seem to be in agreement that they’re supported >50% (albeit, we’re all a bit confused about what that means), so I’m thinking that’s what I should report.
Would I get in trouble if I submit 6 for household size and the university decides it’s 4?
Sorry for the confusion, no one in my family has done this before and we’re all a bit lost.
People do not have to be listed on a tax return as a dependent to be considered part of the household. Some schools will ask for a breakdown of the support for a grandparent, while others will accept the parent and student signature on the verification form as certification that they do in fact support them at least 50%. If your grandparents have a pension and social security that can support them if they were to live on their own, you should not include them in the household size - otherwise, you can include them. If the school does change the household size to 4, it will most likely affect your Pell grant, and possibly any aid from the school.
@“Erin’s Dad” I’m sorry, but what are tax deductions? Did you mean that deductions will be added back in after I turn in whatever verification they ask for and that this will go against our favor just because my dad is self-employed? If so, that seems sneaky; I was only inputting information they asked and I never saw any mention of a tax deduction or even a question about whether a parent is self-employed (besides the one I mentioned earlier about the 100 or fewer employee question under the assets section).
I reported my dad’s business income (1040 line 12) as his income earned from work. Did I do something wrong? FAFSA is giving me a headache…
There are deductions allowed by the IRS for tax purposes for self employed folks. Some of these are NOT allowed for financial aid purposes and are added back in as income. Typically, these are things that business owners can deduct, but that others would have anyway…like rent or mortgage on a house, utilities (both for home offices), cars, phones, business travel and food expenses, etc.
@kelsmom <<< your grandparents have a pension and social security that can support them if they were to live on their own, you should not include them in the household size - otherwise, you can include them>>>
I know that this is your expertise, but that criteria sounds flakey. Having a pension and/or SS that can support them if they were to live on their own is one huge gray area. The family may live in Beverly Hills (just to give an extreme example). Just because the grands may not be able to afford a $10k a month apt in that city, and therefore live with their adult child, should not meet the criteria. Or, the grands may enjoy spending their money on fabulous trips and therefore “can’t” fully support themselves. Or, the grands may “almost” be able to support themselves on their $XXXX a month pensions/SS, but need a couple hundred a month from the family.
Grandparents, nieces, nephews, etc — whether or not to allow these in the family size is indeed a judgment call. I worked at a school that had a large population of ethnic students with first-generation grandparents. I could have put these families through the wringer, asking for lots of documentation, but the vast majority of times, the end result would have been the same. Putting up roadblocks to the lowest-income families is not helpful. I realize my advice is based on my experience at an urban university with a lot of poor people and tons of families that are relatively new to the U.S. Aid offices have their own interpretations of rules and their own policies - and as long as rules are applied consistently, schools do what they do.
@mom2collegekids My grandparents only receive food stamps from the government. No medicare, no social security, no pension, no savings. My grandfather works in construction but doesn’t make enough to support himself and my grandmother if they were to live out on their own. And I think my dad is putting money into a retirement account but I don’t see it in the “expenses” portion of the schedule C, so if he is, it’s coming out of pocket.
@thumper1 I’m still not understanding where they would get that number, though, because there’s nowhere in the FAFSA to report that. My gross family income, I’m assuming you mean 1040 line 22 which takes into account business expenses, is a little over 64K, so not much of a difference.
@mommdc I did use the data retrieval tool, thank you
You will be linking to the IRS data retrieval tool. This will give the colleges a view of your parent tax return. In addition, the colleges can ask for additional information via verification if something doesn’t add up. So…they could ask for copies of your full tax return. Every page, including all schedules.
The schools need to be very sure that the are awarding need based institutional aid to students who are really low income. For business owners…the colleges are not in the business of providing need based aid so that your parents can have their own business.
Examples of things that typically get added back in…cell phones, home offices, utilities and other costs related to home offices, cars, meals, travel, etc. Why? Because everyone applying to college has a phone, car, rooms in their house, meals out, etc. Some colleges will add these “business deductions” back into your income.
Also, if there is a large difference between your gross income and your AGI, that could trigger some verification questions from the college.
