Thank you for your help with Question 93d: How much taxable college grant or scholarship aid did your parents report to the IRS as Income?
Sincerely,
VM
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Question 44d: Student’s College Grant and Scholarship Aid Reported to the IRS as Income. (How much taxable college grant or scholarship aid did you report to IRS as income?)
@mommdc,
Yes, Fall 2017 was my first semester in college, no, I did not have any taxable scholarships or grants, and thank you for explaining Question 44d.
VM
@twoinanddone,
Yes, I did have scholarships and grants ($27,250) used for room, board and other QEE (Total QEE: $28,890).
Thanks for motivating me to get my hands around the actual numbers!
VM
@CaMom13,
If I understand you correctly, since I was a full-time student with university-billed qualified tuition and related expenses and other qualifying education expenses in excess of my scholarships and grants, none of which were specifically taxable, then the entry for Question 44d is $0. Is this correcct?
Thank you, in advance, for your assistance!
VM
Quoting @mommdc . . .
If your parents are amending their 2017 tax return then you need to let the school know and provide the 1040X to them.
Why are they amending it? Was there a mistake?
[SNIP]
But if they later amend the 2017 return, you would need to contact colleges with that information, in case the FAFSA EFC would change.
Here’s the rest of the story, as my father’s hero, Paul Harvey, would say . . .
My parents filed their 2017 taxes using Form 1040 with a $0 tax liability and itemized deduction of $34,565 (versus the standard deduction of $12,700).
My father’s calculations indicate that filing an amended return for 2017 using Form 1040X and 1040A with the standard deduction would result in a combined federal and state tax liability, including, interest, fees and penalties, of approximately $1,600.
However, his calculations also indicate that the effect on my sister’s and my EFC, Pell Grant and institutional aid resulting from:
(i) the use of simplified EFC formulas (since the only disqualifier for using the simplified EFC formulas is my parents’ decision to itemize their deductions),
(ii) a federal income tax liability of $1,000 versus $0, and
(iii) other minor changes in data,
would SIGNIFICANTLY outweigh the $1,600 opportunity cost of filing a 1040X/1040A return.
Furthermore, the statement “would SIGNIFICANTLY outweigh the $1,600 opportunity cost” is before taking into account medical expenses of $30,000 that were previously reported on Schedule A that can now be submitted for consideration as a special circumstance at both my sister’s college and my university.
Comments, suggestions, warnings, Anyone?
Thanks!
VM
You had scholarships and grants used for other than tuition and you didnt file a 2017 tax return?
@BelknapPoint please check my post for accuracy.
- The standard deduction in 2017 was NOT $12,700.
- With $34,000 plus in deductions...how would you be eligible to file a 1040A? Does your family own a business?
- The medical expenses can be sent as a special cirucmstance consideration at any college. It you do need to know that these are considered on a case by case basis...and sometimes do not net a dime in additional need based aid.
- Does your college meet full financial need for all? If not...this might not net you anything.
- What was your sister’s FAFSA EFC for the current academic year.
- If your parent tax return was not accurate, then absolutely they need to amend it.
- Keep an eye on your student portal,at each school, and check your email and spam folders....it is HIGHLY likely you will be selected for verification of your financial aid application. Make sure you comply with any requests...immediately.
The standard deduction in 2017 for a qualifying widow(er) or those married filing jointly was $12,700.
You could choose not to itemize deductions, which requires form 1040, and just take the lesser standard deduction and use form 1040A instead. It sounds like OP is describing a strategy to qualify for the FAFSA simplified needs test, although his posts are very confusing.
For purpose of determining tax free status of scholarships and grants, only tuition, qualified fees and books are QEE.
If you had scholarships or grants that paid for room and board and other nonqualified expenses in 2017, then you needed to file a tax return, especially if they were more than the standard deduction.
You might have received a 1098T from the college with tuition and qualified fees listed in box 1 or 2 and scholarships and grants in box 5
If your parents are going to amend their 2017 tax return to switch from 1040 and itemizing deductions to 1040A and standard deduction, then they should do that soon so you and your sister can do your FAFSAs.
Is your sister still in college this year, and will she be still in college 2019/20?
Also, you should file a 2017 tax return as well if you were required to, which it sounds like you were.
The FAFSA has been available since October, why are you doing this now?
Quoting @Madison85 . . .
You had scholarships and grants used for other than tuition and you didn’t file a 2017 tax return?
Quoting @mommdc . . .
. . . you should file a 2017 tax return as well if you were required to, which it sounds like you were.
Yes, I had scholarships and grants used for other than tuition and I didn’t file a 2017 tax return.
Here was my rationale for not filing a 2017 tax return . . .
(1) I had no earned or unearned income in 2017.
(2) None of my scholarships or grants were specifically designated as taxable.
(3) My university reported $27,250 in Box 5 - Scholarships or Grants, $27,194 in Box 2 - Amounts Billed for
qualified tuition and related expenses, and my other qualified education expenses, i.e., books, supplies, and equipment, totalled $1,696, therefore my QEE exceeded my scholarships and grants by $1,640; i.e., no taxable scholarships and grants.
No, I did not and was not planning to file a 2017 tax return.
Was/Is this a mistake and if so, why?
I eagerly await your (or anyone else’s) reply!
Thanks!
VM
Quoting @mommdc . . .
The FAFSA has been available since October, why are you doing this now?
The results of my procrastination, my being very challenged in college, and my father’s decision on whether or not to file an amended return for 2017.
What disadvantage have I incurred by not filing earlier?
Thanks!
VM
@VinnyM could you please read the above thread which will tell you how to quote posters.
Re: later filing if the FAFSA. There are some forms of need based aid that are limited funding per college campus and are awarded on a first come first served basis. If you haven’t already completed the FAFSA, it’s very likely you will not get these…as funds are likely already allocated. These include federal work study and SEOG.
If your qualified education expenses exceeded the total of scholarships, then yes you didn’t have to file a tax return.
Unless some of the scholarships were specifically required to be used for room and board.
^^Even then, he may not be required to file if no taxes were owed because any tax was less than the standard deduction.
I filed taxes for my kids even if nothing was owed as it was easier to file the FAFSA if there was a returned filed.
Quoting @BelknapPoint . . .
. . . although his posts are very confusing.
I apologize for my confusing messages. I have always been accused of provided unnecessary detail, extraneous information, and answering questions that were not asked. I will try to be brief and to the point, and distinguish between (i) messages that are answers to questions asked me, and (ii) questions I am asking.
Thank you for bringing this to my attention!
Sincerely,
VM
The following are my responses thumper1’s message #24 . . .
Quoting @thumper1 . . .
3. The medical expenses can be sent as a special circumstance consideration at any college. It you do need to know that these are considered on a case by case basis…and sometimes do not net a dime in additional need based aid.
4. Does your college meet full financial need for all? If not…this might not net you anything.
5. What was your sister’s FAFSA EFC for the current academic year.
6. If your parent tax return was not accurate, then absolutely they need to amend it.
7. Keep an eye on your student portal at each school, and check your email and spam folders....it is HIGHLY likely you will be selected for verification of your financial aid application. Make sure you comply with any requests...immediately.
Items 3 & 4
No, neither my sister’s college or my college meet 100% of need. However, my father (and to a lesser extent, my sister and I) are familiar with how both my college and my sister’s college handle requests for consideration of special circumstances related to excessive medical expenses including those incurred in the basis years for our freshman year and our sophomore year, 2016 and 2017, respectively.
I think it might be worth mentioning that my father’s justification for filing an amended return and creating a $1,600 tax liability is based on effect on my sister’s and my EFC, Pell Grant and institutional aid resulting from: (i) the use of simplified EFC formulas (since the only disqualifier for using the simplified EFC formulas is my parents’ decision to itemize their deductions), (ii) a federal income tax liability of $1,000 versus $0, and (iii) other minor changes in the FAFSA data, and NOT on any increases in financial aid related to the excessive medical expenses.
Item 5
For AY 2018-2019, my sister’s FAFSA EFC was 2596.
Items 6 & 7
Thank you for the advice!
Thank you, again, for all of your help!!!
Sincerely,
VM
If your father files an amended return, you cannot use the DRT with the FAFSA. You’ll need to fill in the income info by hand, and expect to be selected for verification by the schools.
Consider that in your timing. You asked what ‘was wrong’ with waiting to file the FAFSA and one of the reasons is because school aid and work study funds can be gone if you wait too long. The verification can delay things more.
Quoting @BelknapPoint . . .
. . . It sounds like OP is describing a strategy to qualify for the FAFSA simplified needs test . . .
You are absolutely right, the primary purpose of filing the 1040X/1040A is to qualify for the simplified needs test.
Additionally, a financial aid officer at my sister’s college stated that $1,000 Federal Income Taxes Paid will result in a high Pell Grant as compared to $0 Federal Income Taxes Paid.
Thank!
VM
Did you parents claim the refundable portion of the AOTC?
Paying $1000 in taxes will not change the pell grant amount, which is based on income and assets, not on taxes paid.
The following are a response to a question asked in and a question resulting from mommdc’s message #27 . . .
Quoting @mommdc . . .
. . . Is your sister still in college this year, and will she be still in college 2019/20?
Also, you should file a 2017 tax return as well if you were required to, which it sounds like you were. . . .
Response
Yes, my sister and I were freshman in AY 2018/2019 and sophomores in AY 2019/2020.
Question
Based on the information contained in my response to your message #26 and the fact that I had no earned or unearned income in 2017, are there any other financial aid considerations should compel me or would require me to file a 2017 tax return?
Note: It is not my intention to obtain any legal or tax advice by asking the previous question. (My father said I should make this statement.)
Thanks!
VM