<p>I am the parent of a college sophomore. This is the third year I have filled out the FAFSA and I thought it would get easier but this year has been the most difficult yet--mainly because when I have called the FAFSA reps they either don't answer the question sufficiently or else I wind up more confused. I'm hoping that someone out there can help since we're just about ready to submit the application except for these last couple of issues. </p>
<p>Here's a summary:
Our son worked part time and was below the threshold for wages earned so our accountant said he did not need to file an income tax return; our son also received financial aid and we received the 1098T for tax purposes but it looks like between the scholarships/grants and the tuition/fees there is an overage which I assume is considered income and taxable; we claim our son as a dependent on our income tax return.</p>
<p>One FAFSA "rep" said that our son could not put "will not file" and list his wages. Another "rep" said the opposite. Another rep said that we should mark "Will not file" for our student and that the "total" dollar amount of financial aid reported on the 1098 should be included in our "estimated" AGI and also listed in the parents section under grants and scholarships. Is this correct? </p>
<p>I was also wondering if our son's wages and remainder of financial aid are supposed to be added together and that amount could possibly require him to file an income tax return because he would be over the threshold. OR are we able to absorb one or both of these on our income tax return. </p>
<p>I'm hoping this all makes sense and I would appreciate any advice anyone has to offer as I am now more confused than ever not to mention I have a splitting headache. </p>
<p>You can not do anything with it on your return. The IRS considers taxable scholarships/grants to be earned income and parents can’t put earned income on their return. Total scholarships/grants minus tuition, mandatory fees, required books and supplies equals the taxable amount. Add that to all other income and generally if over $6100 for a dependent, the student has to file his own return. If the accountant didn’t know about the 1098T and there is taxable/scholarships/grants, tell him about it, he should know what to do.</p>
<p>IRS Pub 970 has the details:</p>
<p><a href=“http://www.irs.gov/pub/irs-pdf/p970.pdf”>http://www.irs.gov/pub/irs-pdf/p970.pdf</a></p>
<p>The amount of taxable scholarships/grants reported to the IRS is entered on one of the fafsa questions so it doesn’t hurt the EFC.</p>
<p>If he is required to file tax return, your son should report his wages and any taxable scholarship income on his tax return, not on yours. See <a href=“Publication 970 (2022), Tax Benefits for Education | Internal Revenue Service”>Publication 970 (2022), Tax Benefits for Education | Internal Revenue Service; on how to report taxable scholarship income.</p>
<p>"You can not do anything with it on your return. The IRS considers taxable scholarships/grants to be earned income and parents can’t put earned income on their return. "</p>
<p>Interesting. We had put our kids’ scholarships on their returns, but I’ve known people who think that they’re supposed to put them on the parents’ return if they take the tuition credit. </p>
<p>Yes, I’ve read posts here in past tax seasons too about it being put on the parents’ return and it’s not correct and more of it is being taxed because the ‘extra’ $6100 standard deduction isn’t being taken on it. I think some parents think it’s easier that way but the 1040EZ is so easy I don’t get it.</p>