If only one parent completed their taxes, you may not know where you stand with financial aid. Read on to prepare yourself for options that may benefit you.
The Free Application for Federal Student Aid (FAFSA) is the typical form filled out by current and prospective college students in the United States. It is the form that drives and determines many things including financial aid eligibility, grants, scholarships, or work-study. There are undoubtedly students who will have unique situations when applying for college. If only one parent filed taxes, you can still fill out the Free Application for Federal Student Aid, but you will likely be required to provide documentation of a non-filing status for the parent who did not file.
Although the FAFSA is a government form, verification is conducted by the university’s financial aid office so the verification process will need to be completed for as many schools as a student is seriously considering. Simply listing a college on the FAFSA form is not always sufficient for receiving aid at that college, especially in unique situations. Contact the financial aid office at the college you plan to attend for pertinent information and be proactive about issues pertaining to your application.
The non-filing parent will need to obtain documentation from the IRS. The most typical form is called Verification of Non-filing Letter. However, there are alternative letters that are sometimes accepted as well. Documentation with name, tax year, social security number and non-filing status will suffice. If the non-filing parent maintains the status, a dependent student will need to continue the documentation from year to year. If the parent does not live in the United States and is not a citizen, there is a place to indicate that on the form by selecting “foreign tax return,” followed by more specific questions.
In addition to the non-filing status, there may be more documentation about wages required. If any wages were received, copies of a 1099 or W-2 will be expected. Likewise, Social Security benefits would require a copy of an award letter. Other untaxed examples of income received could include welfare or public assistance, child support and interest income. Combat pay and some housing, food and other living allowances paid to military members are considered untaxed income, as is veteran disability pay. Some per capita payments to Native Americans are also untaxed. The financial aid office at each school will have slightly different protocols when verifying applications. Usually, a financial aid package cannot be created until requested documents are received and verification has been completed. The general rule of thumb is that more information is better, especially when providing information for a non-filing status.
Timing is so important when applying for college. Because universities review and distribute funds as applications come in, it’s important to have the correct documentation and information ready. Generally, colleges and universities have access to your information one business day after it’s processed, but each institution has its own protocol for reviewing applications and distributing funds. The timeline can vary from school to school. If documentation is missing, the application could be flagged and delayed. Some schools and states have limited aid and it’s distributed on a first-come, first-served basis, especially pertaining to grants, so having a delayed application is not ideal.
If the scenario is that one parent filed their taxes and the other one did not because one parent needed to file for an extension, the “will file” option would be selected. If the “will file” option is selected, a late-December pay stub or previous year’s tax information can be used as a good estimate if the income is similar. The FAFSA would then need to be updated when the information becomes available. After the parent files the return, the status will need to be updated from “will file” to “already completed” and any final monetary amounts will need to be updated as well.
Using the IRS data retrieval tool is a great way to streamline tax information for the parent who filed and the parent who needs non-filing documentation. This tool allows tax filers to provide consent to the IRS to upload data from a federal tax return at the time the FAFSA is filled out.
There are several IRS transcript types that the IRS offers at no charge. A Tax Return Transcript is usually sufficient for applying for student loans because it includes adjusted gross income from the original tax return. This form would be utilized by the parent who is filing. A Tax Account Transcript is available for the current year and up to 10 prior years if income has changed and a university requests that information. A Record of Account Transcript combines the two above mentioned transcripts into one comprehensive transcript. The Wage and Income Transcript or the Verification of Non-filing Letter would be utilized by the non-filing parent.
Filling out the FAFSA can seem like a daunting task when applying for college but there are answers out there for countless student circumstances. If only one of your parents filed taxes, there are resources and answers for you when filling out the FAFSA. The best way to access free, specialized information is to contact a financial aid officer at the school you are applying to. In addition, tax professionals are skilled in navigating the nuances of your unique situation.