FAFSA vs IRS return discrepancy, tax due, potential to delay/reduce FA
We filed our FAFSA early for some EA applications. First I spoke with our tax preparer regarding this question: son/student had worked for cash last summer, earning $500 or so (less than the threshhold to generate a 1099) and had some dividends including some from a college savings plan he closed and cashed out. We were told to check "will not file" on FAFSA, but to report the $500 income
Just learned that son will have to file a tax return after all, but will ow no taxes UNLESS he reports the cash wages for which he received no 1099 form from his employer... BUT he did include this income on his FAFSA form.
We have been selected for verification... which could be because son's last name is different from parent's, OOS residency for the colleges applied to, just because we said "will file", etc and who knows why else it could be.
As I understand it , if son owes taxes, the payment will delay the IRS retrieval tool and jam up the overall FA awarding process.
Would it better to amend the FAFSA to drop the $500 wages?