In an effort to help employees who might be short on cash over the holidays, my employer direct deposited all 1/1/16 paychecks early on 12/31/15 so $ would be available before Monday. I get paid biweekly so I received 27 paychecks in 2015 rather than 26. Had no idea this was happening until it was already completed. Company was aware I was prepping to do FA forms as I pushed a bonus until 2016.
With 2 kids in college and the 2015 tax year being used twice for aid consideration, this obviously is not ideal. Other than trying to explain in the extenuating circumstances section (already have to use that section and I am not happy about watering it down with more to consider), any suggestions on how to make colleges aware that my 2015 income is inflated due to a nice gesture on boss’ end?
First determine if it will make a huge difference. If you make $48k per year and this bumps you over $50k,then it really matters. If you make $100k and this makes it $103k, really not going to matter much.
To get the total income back below $50k, you could make an IRA contribution if you haven’t already maxed out.
Thanks - already maxed out 2015 IRA contributions with a Roth.
Older child at a school that meets need and younger likely to end up at one as well, so every $ added to my EFC counts. Second child is applying for some need based scholarships as well.
I don’t think anything can be done. A lot of people got an extra paycheck (53 or 27) in 2015, if their payday was a Friday and since 1/1/16 fell on a Friday. Since it is a holiday the paychecks were deposited on 12/31.
Thumper, you do have to add it back in, but if your AGI is below $50k, and with another qualifier (displaced worker, for example), that gets you to simplified assets. It’s rare that it works out so close to $50k but if it does it is worth making the IRA contribution.
As I said, there are only a few situations were that extra paycheck will make a big difference for FAFSA or even school aid. If you are a low wage earner, that last check is going to be low (OP said it was a 27th check). If a person earned $48k per year, he’d get 26 checks for $1846 gross. In 2015, that person is going to get one additional $1846 check, for a gross income of $49,846, still under the $50k. The Pell grant is not going to be that different for $48k or $49.8k, and schools are not going to give that much less for need based aid.
If it is a high wage earner, and each check is $8000, that’s going to add to the AGI, but the difference between 26 pay periods and 27 is not going to mean the difference between a huge pell grant or none at all-it will be none at all either way.
One place it could make a big difference is in California and qualifying for the awards that have hard cut offs at $80k. That would really suck to have getting paid a day early cost you the entire award.
The OP might want to check with the accounting department to see if the official payday was changed. When I worked for the government, our official payday was thurs, but we always got our checks direct deposited the weekend before and the ACH date was always the Monday before. However, I could see my check deposited the Friday before, and I could spend the money on Sat. (all transactions would be as of Monday as the bank didn’t post on weekends). The official payday was never change. Sometimes we’d get paid earlier than a Friday too, like when Christmas was a Monday, we werepaid Thursday, a full week beforethe official payday. Official payday didn’t change, and on the pay stub it still read the Thursday date a week later. Maybe the OP’S check was still officially in 2016?
Second child has applied to a variety of schools including those giving merit aid.
Yes - date was officially changed to the pay period ending 12/31 and deposit date of 12/31.
Middle class earner that is over the limit for simplified assets. My concern is that every dollar I earn raises my EFC and thus first child’s aid will definitely be reduced for the next two years and second child may face the same problem. I ran the NPC for first child with and without the extra pay. The additional amount isn’t staggering, but it is significant, especially when it impacts two years for that child and potentially has the same impact on second child. Could end up reducing aid by an amount that exceeds the paycheck after taxes.
If you were able to get the school to recalculate FAFSA EFC without the money, would you remember to ask the schools to increase your EFC for the FAFSA that uses your 2016 tax return?
@madison85 I’m not sure what you are implying. For my first child, I’d be done with financial aid and they would have no interest in my 2016 tax return. As for the second child, it remains to be seen if they get any aid. But yeah, if I appealed the aid award based on the circumstances that the money should have been earned 2016, I would, in fact, “remember” that detail.
I think it is fair to explain it. It is income that skews the result. And you can have your employer confirm your 27/26 paycheck issue to send in. They may allow you to subtract it out as 2016 income.