Hello,
I apologize for the laundry list of problems I need help with, and thank you in advance for taking the time to help someone in need out!
I’m a freshman undergraduate student, the first in my family to attend university in the United States and so I’m the one responsible for a large portion of the technical paperwork. Naturally, I’m kind of learning as I go along and have no idea what I’m doing or how I’ve gotten this far. I attend a not-so-competitive state school and believe my slightly competitive resume (in tandem with low family income) have resulted in my receiving some relatively nice returns in financial aid.
I was filling out my FAFSA so that my financial aid might be renewed for the 2015-2016 year when I came across some problems. I’ve tried researching these threads, various other sources, and primary resources to gain a better understanding of what to do but I need some external confirmations.
First, regarding the 1098-T. Do I need to do anything with this document? To my understanding other universities have policies where they send the 1098-T to the IRS on behalf of the student, meaning the 1098-T is just for the student’s personal records.
Second, what is reported in the financial aid section of the FAFSA on behalf of the student? I understand that it is a question of taxable scholarships but here’s where I’m confused. For fall of 2014 I received $7,400 in scholarships and grants. My tuition for the fall semester was around $3500. I received $3900 or so in a bank account (this was used almost exclusively to pay loans and debts [not a very wealthy family]). My 1098-T DOES record that I received $7,400 in aid BUT it says that I was billed (qualified tuition) $7,100. I checked my financial records and saw that this was because I was billed for semester 1 AND 2 on the 1098-T. So theoretically, following this line of thought, $7,400-$7,100 would result in me recording a saved $300.
I believe that according to IRS and FAFSA guidelines I DO NOT have to record this in the FAFSA section that asks about scholarships and grants. Additionally, I believe that I DO NOT have to file taxes (let me add that I’m 19, am a full time student without a job, and am dependent on my parental units). Are these assumptions correct?
Third, and this is where it gets REALLY whacky, I’m confused about what to do for next year. This is significant because I also received aid for the 2015 Spring semester. This time I received $7,900 in scholarships and grants and had a tuition of $3,400 or so. I received about $4,500 in refunds - which has already started to pay for books/bills and is dwindling down. So the concern is that my 1098-T DID NOT have this recorded. I guess this makes sense, though, since the 1098-T explicitly asks for funds received during the year 2014. I’m assuming this means that the money I received for this semester will need to be reported at the end of 2015 (I.E. it will appear on my 1098-T for 2015 in addition to whatever scholarships I receive then). For example, if I receive $5,000 for Fall of 2015, I’m expecting my 1098-T to have $12,900 recorded. This leaves 2 scenarios for how my qualified tuition is calculated. The same thing could happen where I am billed for 2 semesters at once (around $7,000), OR I could only be charged for one semester ($3,500).
What this would mean is that $12,900-$7,000= $5,900 OR $12,900-$3,500=$9,400 would show up. To my understanding both of these amounts would require me to then file taxes on my own for the 2015 year AND at the point at which the money I received would have passed a certain threshold, I would also have to report the amount on FAFSA. Is this correct or an accurate prediction of the doom that is to come?
Lastly, because, even though it is external return, this money comes in the form of aid, is there any way to not be forced to do taxes / pay taxes on the financial aid? That is to say, is it possible to report to the IRS or for purposes of FAFSA that I received (an estimated) $9,400 or $5,900 (continuing from the above example) but not be penalized for it (in terms of taxes and future aid eligibility)? What can I do to make sure that my aid levels remain consistent while not paying large fees for receiving said aid? I’ve been getting more and more stressed because I know this money is critical to helping my family pay off loans/bills/etc and just staying afloat and want to contribute as much as I can to the cause while making sure no one gets screwed by the government, academic institutions, bureaucracy and so on.
I apologize again for the length of this post but I’m at a complete loss. Also, if some of these questions seem silly I’m just on nerves end and need to plan in advance to ensure I don’t screw anything up and over.
A last note - I just submitted my FAFSA (1/28/15) under the assumption that I didn’t need to report my current aid (see first mention of 1098-T).