<p>My question is regarding FAFSA, question#38--Students 2011 Earned Income From Work. Am I supposed to include taxable scholarships income here? My son did not work in 2011, but received $11K in taxable scholarships. Originally,I thought the answer was to put $0 since it was not "earned from work" but when I use the IRS Data Retrieval Tool, it includes the same answer as entered for Question35, the AGI, which includes the taxable SCHLR.</p>
<p>If I am supposed to include taxable SCHLR in Ques#38, I answered it incorrectly on last years FAFSA. Last year, I only entered the monies earned income from an employer and did not include the taxable SCHLR. Any suggestions on what I should do here? Thanks in advance.</p>
<p>Yes, it would be included on line 38. It won’t matter as far as FAFSA is concerned as it should also be on question 43d and will be backed out of the student’s earnings when calculating their contribution from income.</p>
Unless the earned income was over $6000 (excluding the scholarship income and work study earnings) I wouldn’t worry about. All scholarship money is backed out of the income as is work study earnings if you had any. The student also has $6000 income protection allowance so unless he earned more than $6000 it would not affect the EFC in any way.</p>
<p>No. You do not put taxable scholarship money in question 38. Question 38 asks for money earned from work. It is used to calculate allowances for FICA taxes. Neither taxable scholarships/grants nor WS should be put in this line as they do not attract FICA taxes</p>
<p>If the student has enough income (including taxable scholarships/grants amd WS ) to be required to file a tax return, the taxable scholarship money will be included in the AGI from the tax return on line 35. Money earned from work is reported on line 38 in order to calculate FICA tax allowances. Then there are other questions, 43d and 43?, that ask about taxable scholarships/grants and WS included in the AGI. You put the amount of taxable scholarships/grants in those questions and the EFC formula deducts them from the AGI before calculating the EFC.</p>
<p>If the IRS retrieval tool is putting taxable scholarship income in this line, that sounds like a bug in the system. When you do FAFSA, line 38 plus line 43s can not add up to more than the AGI.</p>
I beg to differ. Look at the instructions for question #38:
If you filed:</p>
<p>IRS Form 1040 – Use Lines: 7 + 12 + 18* + Box 14 [Code A] of IRS Schedule K-1 (Form 1065)</p>
<p>IRS Form 1040A – Use Line: 7</p>
<p>IRS Form 1040EZ – Use Line: 1</p>
<p>This the line for total income (at least it is on 1040EZ and it is included in the student’s income for federal returns). </p>
<p>See instructions for Line 1 on 1040EZ:</p>
<p>Scholarship and fellowship grants not reported on a Form W-2. Also, enter “SCH” and the amount in the space to the left of line 1. However, if you were a degree candidate, include on line 1 only the amounts you used for expenses other than tuition and course-related expenses. For example, amounts used for room, board, and travel must be reported on line 1.</p>
<p>NOTE: FYI, line #38 is not even used in FAFSA calculations if the student is a tax filer. Line #35 is the one used for calculations in this instance.</p>
<p>Question 38 is used in the EFC formula to calculate allowances in the EFC formula for FICA. The AGI in line 35 is not used to calculate FICA because it includes items that do not attract FICA. </p>
<p>swimcatsmom, Nowhere does it inidcate NOT to put scholarship dollars in question #38 and the instructions explicitly state to use the amount from line 1 of the 1040EZ which does include it. Why do you think the IRS retrieval tool put that amount in line #38 of the OP? You think the tool does not work properly. </p>
<p>As I stated, if you look at the FAFSA formula worksheets, #38 is ONLY used for non-filers in the calculation, otherwise the amount of #35 or AGI is the number used in the calculations.</p>
<p>Yes, whatever is on line 7 (1040) or the corresponding 1040A/EZ lines IS reported as income from work. If you don’t do it that way, you get an error message. Untaxed portion of scholarships plus W2 income is added together and entered on that line, and whatever amount is on that line is the amount reported as income from work.</p>
<p>We did my son’s fafsa back on 1/4 and I remember it the other way around, got an error when we included scholarships on question 38. I think the error happended when we entered the taxable scholarship amount for question 43d which then meant question 38 plus scholarships was greater than AGI. The error message wasn’t clear but we changed question 38 to not include scholarships and were able to continue to the next screen. We did included earnings from his W-2 stipend which didn’t have FICA taken out. The retrieval tool doesn’t populate question 38. His fafsa has completed verification and still shows only W-2 earnings in question 38.</p>
<p>Just like the IRS records don’t seem to know that someone wrote rollover on line 16, I don’t think they know SCH and an amount was written on the wage line so the amount from wages only isn’t transferred to fafsa.</p>
This makes no sense. Question 43d is the scholarship line where the amount is backed out of AGI. It is a subtraction and NOT an addition. AGI would include andy earned money and scholarship money that was taxable (i.e.not used for tuition or books). The only other item that would be included in AGI would be taxable interest from any savings or checking accounts the student might have. In my son’s case his AGI was the taxable scholarship + money from his W2’s + earned interest. The scholarship money is THEN subtracted from that income as well as money earned that is “work study”. The result of this is what is the “total income”.</p>
<p>After that, the state and social security allowances and the $6000 protected income is subtracted from this amount which nets your AI (Available Income) that is assessed.</p>
<p>It will make more sense to you to download the worksheets so you can see how each line is added or subtracted. See link below (especially page 10).</p>
<p>Question 35 is AGI, question 38 wages, question 43d taxable scholarships. I realize 43d is subtracted from 35 in the formula, I’m very familiar with the worksheet. What we encountered seemed to be a data entry reasonableness check in the fafsa online program that said 38 + 43d shouldn’t be larger than 35 which they were when scholarships were included in both 38 and 43d. When we changed 38 to only include wages, we were able to go to the next page. I’m only reporting what we experienced.</p>
You must have had something else wrong as I had no problem. My son’s #35 was $7708, his #38 was $7,687 and his 43d was $5,600. This is his submitted and processed FAFSA. He had $2,087 in actual work earnings and $21 in interest. Also, if you selected the student as a tax filer I don’t understand why it would even matter what you put on #38 as it’s not used in the calculation, #35 is. The only way I can think you would have a problem is if #35 was less than 43d as it would have to be included in your AGI so it couldn’t be higher or 43d was more than #38 as #38 should be equal or more than 43d.</p>
<p>Let me ask a hypothetical question. Assume one did not file and had no actual work earnings but had scholarship income. There is no AGI to use as a starting point and you had $0 on #38. What line item would you subtract the amount of 43d from to get total income since this is a subtraction?</p>
<p>annoyingdad - that was exactly my experience when I did FAFSA in prior years. it would give me an error message and would not allow me to proceed if questions 43d plus question 38 exceeded question 35.</p>
<p>Let me ask a hypothetical question. Assume one did not file and had no actual work earnings but had scholarship income. There is no AGI to use as a starting point and you had $0 on #38. What line item would you subtract the amount of 43d from to get total income since this is a subtraction? </p>
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<p>That is why you have to use the amounts listed on your tax return per the instructions. Do not change the amounts. So if line 1 is $5000, AGI will be $5000. Then when you have to report your taxable amount of scholarships, there will be $5000 from which to back out the $5000.</p>
<p>Thanks everyone for your help with this matter. Just to give an update on how I answered this question on my sons FAFSA. Originally, my sons Fafsa was completed/processed without using the IRS Data Retrieval Tool. We were later told the IRS Data Retrieval Tool was required so I went in to make a revision to the Fafsa. When I clicked the link to use the IRS tool & answered some questions, a box automatically popped up on the screen with pre-filled answers from the IRS based on my sons filed taxes. The amount of $11962 was pre-filled for questions 35 & 38. Again this was the taxable SCHLR monies only, no other income to report. I was told by a Fafsa rep NOT to change any amounts supplied by the IRS as this would create problems down the road. Anyways, once the information was transmitted to the FAFSA from the IRS, the document ended up showing as: ques#35 $11962 and ques#38 as “0”. Ques 43d was previously entered as $11962 (grants/schlr).</p>