Help! EFC went up after using IRS Retrieval tool

I used the IRS tool because a college recommended that I did so, so I did and all the numbers came out exactly the same. However, after doing such, my EFC went up from 1,444 to 8,955! Now it says I’m not eligible for grants! Help!

Look carefully to see if there are any changes. When I did that last year, I found they add back the IRA contribution to the AGI which I did not know that is the way supposed to be. My D’s EFC went up a few thousands too.

For financial aid purposes, the EFC calculation DOES add back in retirement contributions pretax as income.

Is it possible that this didn’t get entered correctly on your originally submitted FAFSA?

It just doesn’t seem right, because we have a lot of investments, but my parents’ adjusted gross income was only 36,000.

Colorado, you do understand that your investments count. Your income is not low enough to qualify for the simplified needs test. All of your investments matter.

The IRS data retrieval tool ports the information directly off of your tax returns. There really isn’t much chance that it is incorrect…unless your taxes are incorrect. It is more likely that something was not entered correctly on your FAFSA when you manually entered the data.

how much do you have in investments?

You sound like you don’t understand that your EFC was going to go up anyway…once the “wrong numbers” that you initially put in were realized, the EFC was going to change. At least you learned early on.

It’s not like you were going to get the grant based on wrong numbers.

When you say that your parents’ income is $36k…does that also include the income from their investments? Or is that just the income from jobs?

Check with your parents - did they have an IRA rollover? If so, that is the issue. The IRS retrieval is unable to take that into consideration, and you cannot update it after doing the retrieval to fix it. If that is what happened, contact the college’s financial aid office to ask them what info they need so they can manually update it on their end.

@kelsmom, do you happen to know if FAFSA people are planning to fix this IRA rollover bug? All they have to do is to add a question if distribution was a rollover.

Thanks for that tip. We did a rollover this past year. DD will need to call her school.

I don’t think anything is in the works to fix that, although it certainly has been mentioned by aid administrators as an issue. All they would really have to do is look at the taxable amount for that line on the return when they do the retrieval (it would be 0 if purely a rollover).

Thanks. I believe FAFSA pulls in line 15a from 1040 while they probably should pull in line 15b. Then they say to exclude rollover amounts. Go figure.
CSS wants 15a minus 15b unless it is a rollover. They are probably fishing for Roth IRA distributions.

FAFSA asks for 15a because they want to include Roth distributions. A Roth distribution may not be taxable but it is income contributing to the family’s ability to pay college expenses. That’s what FAFSA is trying to determine.

It’s times like this that make me wish that IRS tax regulations and FAFSA rules were more aligned so that people don’t have to guess so much about which sources of income will be tapped and which ones won’t. If a deduction is A-OK or an exclusion is A-OK per tax it seems nuts to me that the FAFSA will add it back anyway.

The IRS and FAFSA aren’t trying to achieve the same goal. FAFSA is trying to determine what resources a family has to contribute to college before other taxpayers start kicking in for them.

True, I just wish it was more consistent. Both systems do have exclusions that shelter income and assets but they are for wildly different amounts and percentages which can be confusing to people.

Melaniesdad…and others. All colleges have net proce calculators on them. At the very least, this will give you an estimate of your net costs. Each school’s calculator takes into consideration how THEY treat your assets in the calculations.

However, folks who own their own businesses or are self employed, divorced parents, and families who own real estate other than the primary residence should know that the NPCs are not accurate for them.

The asset protection allowance for the FAFSA is in the public domain…no secrets there.

We were talking here about a specific bug in implementation of FAFSA DRT tool where FAFSA instructions say to exclude rollovers while the tool may include rollover amounts because it blindly pulls the number from a particular line on the tax return. I still believe that they need to include a question if any part of IRA distribution was a rollover and then calculate accordingly. IRA rollover may represent a family’s lifetime savings and may be a very large amount.
This has nothing to do with NPC calculators that probably do not mention IRA distributions or if they do - will definitely tell you to exclude rollovers.
From what I learned college finaid officers in Profile schools have some discretion in adjusting input values in institutional EFC calculations. I am not sure if they have a leeway to adjust a FAFSA EFC and this may affect federal aid.

I don’t see it as a bug, there isn’t really a way to do this from the info on a return. Line 15a has total distributions and 15b taxable distributions. If a part or all of 15a was a rollover, you write ROLLOVER on the line. In the case where there’s both a Roth distribution and a ROLLOVER of a traditional IRA there isn’t a way for the DRT to know how much is which from the info on the return, it can’t assume it’s all rollover. The DRT subtracts 15b from 15a and puts that amount for question 94e in addition to 15b being included in AGI.

My son’s first year in college I retired and did a 401k to IRA rollover and I contacted his school and supplied doc that it was a rollover. I made some non-deductible contributions to IRAs in the 90s so now that I take some IRA distributions each year, a small part isn’t taxable. Every spring my kids school sends me a form asking whether any of the untaxed distribution was a rollover. A question about rollovers on FAFSA isn’t going to satisfy verification, some proof of a rollover is needed that the DRT can’t provide.

Annoyingdad, I didn’t even think about that. In all my many reviews of tax returns, I never saw anything but “rollover” on that line …so was not even considering other things that could go there! That is exactly why the DRT won’t be able to take that into consideration.

I still believe that DRT should not attempt to correct a field that it cannot fully verify. It should allow applicant to claim a rollover and leave it up to the finaid office to request documentation.