As parents we are filling our usual joint 1040 and the fafsa for our two dependent (for IRS purposes) children both of whom get >50% support from us; for FAFSA purposes our D ( freshman undergraduate) is dependent on us, and our S (freshman graduate) is independent. Both children have no earned or unearned income except the following. Our D's 1098-T shows billed tuition and qualified expenses are $29,644, and her scholarships and grants are $30,000. Our son's 1098-T shows billed tuition and qualified expenses are $28,196, and his scholarships and grants are $1,500 (for some reason his federal loan which paid for his full tuition etc does not show on the 1099-T. Both children have had about $1500 in expenses for books (not mentioned in the 1098s).
Even though we had entered all their 1098-T info on the taxact software I use to do our 1040, their scholarships and grants never got transferred automatically as our income, so I guess for us parents it is not a part of our AGI (or can it still be, and should we enter it manually somewhere?). Our main question is: What should be entered on my children's FAFSA on the question "Grants and scholarship Aid reported in the AGI "? This same question needs to be answered for the Parent, and for the student. Should it be 0 for both section in FAFSAs for both children? Finally, do either of my children need to submit an income tax form because of these scholarships and grant?