My EFC suddenly and randomly went up?

Paying for College
21

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We live in Massachusetts.

One OOS public school that he’s been accepted to responded with a “Non-Resident Tuition Grant.” A second OOS public school offered an “Out of State Grant.” Were they for his stats? No clue.

The private school scholarship was listed as the President’s Scholarship.


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Hmmm…interesting wording of those OOS public awards. Did those come with the acceptance letters? If so, they may be merit based. Or did they only come with FA pkgs (a listing of the grant, along with a mention of loans, etc ). Which schools are these?

I noticed that you’re waiting the results on VT. Have you run their net price calculator? Does it indicate any aid? VT is usually bad with OOS aid…often expecting OOS students to pay full price regardless of EFC.

22

If one of those grants is from George mason, then it appears that it is need-based…which could mean that it would be reduced or removed based on your New EFC. I hope you’re able to find out what’s really behind that increase.


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Out-of-State Grant This grant, based on financial need, out-of-state residency and full-time enrollment each semester, provides assistance to undergraduate students working on their first bachelor’s degree. It's limited to four years. You must meet the following conditions to be considered for the grant in future years: Continue to meet the level of financial need as established by the OSFA.

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23

If you used the data retrieval tool in the FAFSA to import your tax return information, then the federal tax paid amount will be brought over directly from your tax form.

24

Changes made by one school are not supposed to have any effect on your FAFSA report to another school. At least that’s what was explained to me when I had this same situation happen. One of the schools DD had applied to made a change - and it was one of the items that was directly imported through the data retrieval tool! I called the FAFSA helpline to learn what school it was and then followed up with that school. I was told - in a heck of a lot more words - they can do whatever they want with the data. That school was a “meets full need” school and gave us the absolute worst financial aid package of any school, with an EFC of about 40% of our AGI. It was a CSS profile school as well, so it made no sense to me why they had to go in and mess with the FAFSA data.

25

@mom2collegekids One “grant” came with an acceptance letter and the Mason one came with the financial aid package. I ran the NPC for every school with my original EFC and none said I would receive anything. I was pleasantly surprised with the grants because it brought the schools in line with the others he’d applied to.

@mommdc I tried to use the import function but the FAFSA website choked on it several times so that necessitated self reporting on my part.

Here’s the issue that has me disgruntled. I write an $8,000-$10,000 check to the Feds every April to pay taxes owed by my wife. I assure you that it’s a VERY real cost, no matter how you want to classify it. The other related problem now is that I put aside money in savings all year long to pay those taxes in April. That means my “savings” on the FAFSA is artificially high by roughly $10,000 because it’s earmarked for taxes.

26

Shouldn’t you sent prepaid tax quarterly to IRS if you have $8k to $10k due every year?

27

I had the same thought. Quarterly payments could (somewhat) reduce the assets on hand at the time that FAFSA is filed, instead of waiting to pay a lump sum in April and therefore having it all on hand when FAFSA is filed.

28

^^^^
Exactly…send the money in before filing FAFSA.

Since the Mason grant came with FA pkg, then it could go away.

The “grant” that came with the acceptance letter sounds like merit, but call to be sure. It appears that it was awarded thru the admissions office.

Since the npc’s all show that you wouldn’t get any aid from any school, are you prepared to pay full price for schools like VT or Mason (if that grant goes away)

29

@billcsho @BelknapPoint Long ago my accountant advised me against letting the Government hold my money for me. His rational, as long as I could be disciplined about it, was that saving money all year keeps the funds in my possession but available for taxes if/when necessary. If I save $10,000 and my taxes are only $8,000 that year then I end up with an extra $2,000 in my savings account.

Going forward I may need to pay estimated quarterly taxes to lower my reported savings.

30

@mom2collegekids Now I know…just a little too late…

31

Your accountant wasn’t considering the FAFSA effect. But as you’ve noted, you’ll do things differently now. And if you estimate that you’ll need to eventually pay $10k, then send in $9k early and hold onto the $1k…that $1k isn’t going to affect EFC much at all.

32

@BelknapPoint maybe you can clarify this.

At one point…my husband and I had to mail in additional owed taxes to the tune of $6000. We received a love note from the IRS with the four little coupons for paying quarterly. In addition, IIRC correctly, we were warned that underpayment in THAT amount repeatedly could result in some kind of financial penalty.

I believe the IRS expects you to come a LOT closer in your wothholdongs than owing $10,000 or so in April.

And if you are self employed, you are expected to send quarterly payments.

33

With a tax bill that big in April, I’m wondering how you’re avoiding IRS penalties.

*The United States income tax system is a pay-as-you-go tax system, which means that you must pay income tax as you earn or receive your income during the year. You can do this either through withholding or by making estimated tax payments. If you didn’t pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they either owe less than $1,000 in tax after subtracting their withholding and refundable credits, or if they paid withholding and estimated tax of at least 90% of the tax for the current year or 100% of the tax shown on the return for the prior year, whichever is smaller. There are special rules for farmers and fishermen, certain household employers and certain higher income taxpayers. For more information, refer to Publication 505, Tax Withholding and Estimated Tax.

Generally, taxpayers should make estimated tax payments in four equal amounts to avoid a penalty. However, if you receive income unevenly during the year, you may be able to vary the amounts of the payments to avoid or lower the penalty by using the annualized installment method. Use Form 2210.pdf, Underpayment of Estimated Tax by Individuals, Estates, and Trusts, to see if you owe a penalty for underpaying your estimated tax.

The law allows the IRS to waive the penalty if:

1.You didn’t make a required payment because of a casualty event, disaster, or other unusual circumstance and it would be inequitable to impose the penalty, or

2.You retired (after reaching age 62) or became disabled during the tax year or in the preceding tax year for which you should have made estimated payments, and the underpayment was due to reasonable cause and not willful neglect.*

https://www.irs.gov/taxtopics/tc306

34

Yes, that is what I was wondering too. The due amount is too big that there will be a penalty. In addition, there is little interest in the bank for many years anyway.

35

.My wife’s tax hasn’t always been that high. She’s been working more each year even though she’s only part time. It’s the last couple years that I’ve been getting whacked in the $5,000+ category. She’s about to go full time to help with college costs. That will certainly necessitate quarterly payments going forward to lower “savings” for FAFSA purposes, and now apparently to avoid penalties from the IRS. I’m the primary earner in the family and I pay plenty of taxes, and we file jointly, so perhaps that’s why the IRS hasn’t come calling yet about paying in April.

36

2018-2019 FAFSA uses 2016 income, and your 2016 tax return would have been filed. On the FAFSA, question 86, you are to enter your taxes paid. Per the FAFSA instructions, the amount to be entered is IRS 1040 line 56 - line 46. That is the only amount that can be entered here. People include other taxes paid, but that is incorrect … it is ONLY line 56-line 46. I assume the school had a copy of your tax transcript, and they corrected the amount if it was not correct. That is what they are required to do.

Or am I misunderstanding what happened?

37

https://fafsa.ed.gov/fotw1819/help/faahelp61.htm

Yes, @kelsmom is right, did you follow those instructions?

When I was self employed I had my husband increase his withholding so we didn’t owe at tax time.

38

That’s exactly what we do. It works well.

39

I don’t think the problem here is a result of when the OP pays his “taxes owed”, although the advice given about that is helpful. Because aren’t only about 6% of assets above a certain allowance considered/included in the EFC? If so, the fact that the OP had a poorly timed $9,000 in the bank would have resulted in only about a $500 increase in an EFC - not $5,000. The EFC wouldn’t suddenly increase by $5,000 because of that anyway - the $500 would already be included in the EFC figure.

He stated that he checked and the increase was due to the the college reducing his taxes paid amount by $12,000.

I suspect this might be the problem:

“I tried to use the import function but the FAFSA website choked on it several times so that necessitated self reporting on my part.”

If the FAFSA only considers/wants the “taxes paid” line item, where/how is the “taxes owed” line item considered in the FA process? I’d think it’d be added together for the calculation wouldn’t it? Maybe the OP added the 2016 taxes owed, but paid in 2017 ($9,000) to the taxes paid line item when that amount was already being considered?

I found this info online:

“The FAFSA weights parents’ income much more heavily than parent assets, assessing income according to a scale of 22 to 47 percent of available income”

If the OP fell into that category of having his income assessed at closer to the 47%, then that $9,000/$12,000 added incorrectly to the taxes paid might have resulted in the additional $5,000 in the recalculation.

But that still doesn’t explain why the amount was reduced by $12,000 (instead of $9,000). There’s something else going on for them to reduce the amount by $3K more than the $9,000. If I was the OP, I’d call the FA office to see why they reduced the taxes paid amount by $12,000. Or just compare the FAFSA information to his 2016 tax return.

40

If it was a CSS profile school, maybe they disallowed some of the business deductions of the wife on schedule C? Or maybe self employment tax was added in with the tax paid amount?

The FAFSA deducts from income federal taxes paid and the amount of taxes owed based on federal tax tables is not the same as tax paid for some people who qualify for tax credits.