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We are at this point in the FAFSA . We are ELIGIBLE to file 1040A because our income in 2003 was under $50,000 . However , we sold the last of my husband's stocks ( because of temporary unemployment ) in 2003 at a very slight loss so that stock must be reported on a schedule D ( which means reporting on a 1040 , I think ).

Anyone familiar with tax lingo & FAFSA rules enough to know to know HOW we should answer the 1040A or 1040 question on the FAFSA ??

By Morgantruce (Morgantruce) on Sunday, December 28, 2003 - 06:58 pm: Edit

You will have to file a 1040 because of the Schedule D.

Having a capital gain or loss to report makes you ineligible to use the 1040A. So, on the FAFSA... answer that you are ineligible to file the 1040A.

By Easydoesitmom (Easydoesitmom) on Tuesday, December 30, 2003 - 04:46 am: Edit

I wonder if it would pay to write to the individual college offices to emphasize that we will file a 1040 because we had to sell the last of the stocks to pay health insurance premiums ( and our AGI went below $50,000 because of unemployment ) .

I know the FAFSA question " Did you file a 1040 ?" will automatically put us in a lesser need category even though our income & family size would otherwise put us at a higher need for aid ?

By Morgantruce (Morgantruce) on Tuesday, December 30, 2003 - 08:00 am: Edit

"....will automatically put us in a lesser need category..."

Not at all true.

I had the same situation---had to file a Schedule D (because of the sale of student's stocks.) I did several things. I mentioned it in the notes on the CSS Profile.I spoke to the FinAid officer and he made note of it. I mentioned it in a note along with the college's FinAid form.

It was NO big deal. They certainly did not mistake me for Donald Trump because I filed a 1040 and a Schedule D.

By Vadad (Vadad) on Tuesday, December 30, 2003 - 10:30 am: Edit

Though I'm no expert, my observation has been that questions like which tax form you file have no impact on the FAFSA result. It is purely a numbers-driven formula that results in an EFC. I don't know if it makes any difference to the financial aid offices, but I can't imagine that it would. They are only going to look at income, asset and family size figures, your FAFSA and CSS EFC's, and then, perhaps, make some adjustments for particular circumstances.

By Garland (Garland) on Tuesday, December 30, 2003 - 01:45 pm: Edit

VAdad is right. It's strictly the numbers you present; the formula is very straightforward for FAFSA.

By Whatever04 (Whatever04) on Tuesday, December 30, 2003 - 06:12 pm: Edit

what is the actual formula??
Also, what happens if u own a business. It seems to me like the FAFSA keeps asking about gorss income all the time when to me, gross income seems quite irrelevant. In what way do they acknowlegde that u have a business, and ur net income is drastically different??

By Morgantruce (Morgantruce) on Tuesday, December 30, 2003 - 07:43 pm: Edit

The actual formula? Are you kidding? I figure that is a very closely guarded secret.

The colleges look at your tax return. They see what your net is. FAFSA does deal in gross figures---even for average wage earners. They ask how much you earned. They don't ask about things like "take home pay" or how much you have left after paying your bills.

For most people, Expected Familty Contribution is like a bucket of cold water. The formula supposes a level of frugal living that is way below most people's expectations.

By Dt123 (Dt123) on Saturday, January 03, 2004 - 08:35 am: Edit

I seem to recall that the type of form you are eligible to file does make a difference in some cases, depending on some other factors. The original poster might want to do some digging to find out for sure.

By Easydoesitmom (Easydoesitmom) on Thursday, January 08, 2004 - 12:52 pm: Edit

Question # 34 on FAFSA "If you have filed or will file a 1040 , are you eligible to file a 1040 A or 1040 EZ " :
I did some more digging . I called the FAFSA department and they left me more wary . Here's why : Historically , tax prepapers like to use 1040s which is why this question is asked.
The Herm Davis book says If the parents makes less than $50,000 , they are always eligible for more aid if they file the short form .
However , the on the answer sheet with the paper FAFSA , it says "In general , a person eligible to file a 1040A or 1040EZ , if he/she makes less than $50,000 a year , does not itemize deductions , does not receive income from his/her own business or farm and does not receive alimony . All these conditions apply to our scenario. BUT then it reads " A person is NOT eligible if he/she itemize deductions , receive self-employment income or alimony , or is required to file a Schedule D for capital gains" . We have to file a Schdeule D for a Capital loss of $27.00 on a sold stock.
The person at the FAFSA said to mark YES , filed a 1040 (#33) question but YES to eligible to file short form ( #34 ) question .


This makes me somewhat uncomfortable still and I thought I should check I DON'T KNOW ( yes , there is that option ) on question #34 but the Chaney book says that checking I DON'T KNOW delays processing of the FAFSA and puts it out of the faster SIMPLIFIED NEEDS Formula .

By Patsmom (Patsmom) on Thursday, January 08, 2004 - 02:42 pm: Edit

I wondered about this also. My husband and I must file a 1040 but my son, who has a part-time job, would normally be able to file a short form, except that he has a long term capital loss carryover from a few years ago when we sold a mutual fund in his UGMA account that was doing badly. Of course, the capital loss cancels out way more than his meager income so he doesn't owe any tax, but the fact that we checked MUST FILE A 1040 makes me uncomfortable, too.

By Boysmom (Boysmom) on Thursday, January 08, 2004 - 03:58 pm: Edit

The "Gross Income" referred to in the FAFSA means Adjusted Gross Income. Or in other words, the bottom line on your tax return before exemptions and deductions. For a self employed person who files a schedule C, the gross income is put on the schedule and then business deductions taken. That bottom line is then added to the front of the 1040 and, along with other forms of income, makes up the AGI.

I am not an expert on the FAFSA, but I have done calculations of my own in the web sites that let you figure out in advance what your EFC would be. It seems to me that whether you are "eligible" to file a 1040A in no way changes the EFC. If you're still worried about it, go on one of these websites and try it both ways. I found them to be very accurate

By Shauna (Shauna) on Sunday, January 11, 2004 - 01:25 pm: Edit

The actual formula is hardly a closely guarded secret; why should it be? There are calculators all over the Internet. The formula's right here (from review.com):

1. Parents' Income - Expenses & Allowances = Available Income
2. Parents' Assets - Debts Against Those Assets - Asset Protection Allowances = Net Assets
3. (Available Income x Assessment Rate) + (Net Assets x Assessment Rate)
=EXPECTED PARENT CONTRIBUTION

1. Student's Income - Expenses & Allowances = Available Income
2. Student's Assets - Debts Against Those Assets = Net Assets
3. (Available Income x Assessment Rate) + (Net Assets x Assessment Rate)
=EXPECTED STUDENT CONTRIBUTION

Expected Parent Contribution + Expected Student Contribution
=EXPECTED FAMILY CONTRIBUTION

However, I don't know what Assessment Rate means. But there you are. At any rate, it's far easier to use an online calculator.

Shauna

By Zeroefc (Zeroefc) on Thursday, January 15, 2004 - 10:30 am: Edit

Bottom line folks:
the purpose of the FAFSA is only to determine a students eligibility to recieve FEDERAL funds from UNCLE SAM. While it is mostly an income driven formula it does take into account assets.....but not always. If you are eligible to file a 1040A or EZ, then the "formula" (there are 3 different ones)will turn its head when it comes to assets. Example: An INDEPENDENT student who filed a 1040 had an EFC of 5000 because Uncle Sam took into account the 7000 he had in the bank. Thus he was ineligible to recieve the Pell Grant and the Perkins loan. It turns out that he checked "I don't know". Well Well, had he known he was eligilbe to file a 1040A, Uncle Sam would have been blind to his 7000 in the bank and he would have been awarded a much lower EFC and been eligible to recieve Pell and Perkins.
Parents of dependents: Even if you are not eligible to file a 1040, the first $50,000 in Assets aren't looked at! You know why? Uncle Sam realizes that parents save and continue to save for college AND retirement...SO in the "Regular formula" there's an something called the "Education Savings and Asset Protection allowance"
Thank you very much, I'll be here every night!

By Easydoesitmom (Easydoesitmom) on Thursday, January 15, 2004 - 10:45 am: Edit

It is a crazy formula . I made my THIRD call to
the FAFSA help line and received THREE different ( YES , I DON'T KNOW & NO ) answers which makes me wonder if they are trained
properly on the rules. But one thing I am finding out is putting I DON'T KNOW
is the same as NO .

The FOA at the local school said if there is a
question , they will ask for the tax form which
should make me feel comfortable with answering
"Yes " .