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FAFSA vs IRS return discrepancy, tax due, potential to delay/reduce FA

onesonmomonesonmom Registered User Posts: 213 Junior Member
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?
Post edited by onesonmom on

Replies to: FAFSA vs IRS return discrepancy, tax due, potential to delay/reduce FA

  • Madison85Madison85 Registered User Posts: 10,327 Senior Member
    Owing taxes delays the FA process if you don't electronically pay them until April 15th.

    Also, if he earned $500, then he earned $500 and correcting the FAFSA to exclude them sounds wrong.
  • onesonmomonesonmom Registered User Posts: 213 Junior Member
    I'm with you. Not trying to avoid paying, and in fact willing to pay even if it's not actually "owed" since it was below the minimum threshold. My concern is how to pay the tax owed without having to file by paper. How can we pay quickest and submit electronically so the all-important IRS retrieval tool can be used soonest?
  • CTScoutmomCTScoutmom Registered User Posts: 1,387 Senior Member
    He worked and earned $500, therefore he needs to report it. Since it's self employment, he will owe self employment taxes - so yes he owes.

    You can file the tax return online and use direct debit to pay his balance due. That way you're not mailing in a check and waiting for it to clear.
  • happymomof1happymomof1 Registered User Posts: 25,342 Senior Member
    Read the instructions for schedule C and schedule SE carefully. You should be able to file those without a 1099. If he had spent the summer mowing lawns for all the neighbors, he wouldn't have a 1099 from any of them.
  • njmissy13njmissy13 Registered User Posts: 169 Junior Member
    Both Turbotax and I think Taxact have free online filing for someone that earned so little. I'm not sure if you can do self-employed income through them though. There are free efiling links on the IRS website too. You should be able to do it in a few minutes online.
  • onesonmomonesonmom Registered User Posts: 213 Junior Member
    Thanks, everyone. Our accountant handled it.
This discussion has been closed.