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FAFSA earned income question
okay,. for the last 2 years I have been putting down what is on line 7 from my 1040, (block 1 on the W-2)
NOW, I think I have been doing it wrong and shortchanging myself. This number is used to calculate the FICA tax paid. BUT this number doesn't include the fact that I'm putting $$$ into retirement funds and paying FICA taxes on them.
We're talking about a difference of over $14000 in 2008. What do you put as earned income, the lower number, known as taxable wages on my paystub (block 1 on the W-2) or should I be using block 3 from my W-2. I pay FICA on my retirement contributions. Using block 1 doesn't reflect that.
using the EFC calculator, I have to put the block 3 number to get the program to calculate the FICA taxes I actually paid, using block 1 underestimates the FICA taxes I know I paid by $900
from the finaid.org website
<<This is your salary, wages, tips and combat pay. This figure is used to calculate the FICA tax allowance and Employment Expense Allowance, so be sure to include both this figure and the AGI figure in the EFC calculator form, or the results will be inaccurate.
The FAFSA instructions say that this information may be on your W-2 forms, or on IRS Form 1040 (lines 7 + 12 + 18), IRS Form 1040A (line 7) or IRS Form 1040EZ (line 1). The FAFSA instructions are not entirely accurate, especially when there is partnership income, offsetting negative income or retirement plan contributions. A more accurate result can be obtained by adding Box 5 from your W-2 statements to either line A.4 or B.6 of Schedule SE.