<p>I just amended my FAFSA to reflect my actual 2010 income numbers. It asks for "2010 income tax paid -- use Line 55 from your 1040". Line 55 shows an amount that is less than HALF of the check I will write to the federal government for income tax (forget the additional amount I owe to the state). I followed the FAFSA directions, but why do they want that number vs. the amount I actually have to pay?</p>
<p>Do you pay self employment tax? If so, that’s not included in line 55 and aren’t Federal income tax</p>
<p>The FAFSA formula separately calculates a credit for FICA tax paid based on your AGI. However, the credit only covers the employee portion.</p>
<p>When you are self-employed, you pay both the employee and employer portion. You do get a deduction on your 1040 for the employer portion that affects your AGI (and therefore lowers your EFC) but you do not get a credit for the balance on the FAFSA.</p>
<p>That’s just how it works. </p>
<p>One justification is that self-employed people can take deductions from their income for things like car mileage that people who are regular employees cannot take, which let self-employed people artificially lower their income for tax purposes (and FAFSA purposes). Not getting credit for the employer portion of FICA tax helps balance that out.</p>
<p>Thanks for explaining it – I appreciate it.
Now I’m wondering if financial aid officers use an average when they review tax returns, especially if there are big swings from '09 to '10…guess I’ll find out.</p>
<p>Aid officers use the amount on line 55 for the base year (2010 for 2011-12), since that is the amount the federal formula requires aid officers to use.</p>