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FAFSA / Tax Form Questions

13

Replies to: FAFSA / Tax Form Questions

  • thumper1thumper1 73365 replies3190 discussionsRegistered User Posts: 76,555 Senior Member
    edited December 2018
    Paying $1000 in taxes will not change the pell grant amount, which is based on income and assets, not on taxes paid.

    @VinnyM please read this sentence again...and again...and again. And again. Does your family have HUGE assets that you do not want to have to report?

    In addition...as noted by everyone...why are you doing this now? Should have been done in October. With an amended return that qualifies you for the simplified needs test...when previously you didn’t...you most likely will be selected for verification. That process takes TIME too.

    And make sure your parents order a tax transcript once their amended return is completed.

    Just have to ask...what was your FAFSA EFC this Academic year? How much Pell did you and your sister each get?
    For AY 2018-2019, my sister’s FAFSA EFC was 2596.

    Ah...found it buried in your wall of text. Was YOUR EFC also $2596? Did you each receive a $2500 or so Pell Grant for this academic year?

    And please...read the link I posted upstream on how to do these quote boxes. Your posts are VERY hard to read.
    edited December 2018
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  • thumper1thumper1 73365 replies3190 discussionsRegistered User Posts: 76,555 Senior Member
    Your parents had $34,000 plus in itemized deductions. What were those? Are they positive they are eligible to file a 1040A form?
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  • mommdcmommdc 11256 replies30 discussionsRegistered User Posts: 11,286 Senior Member
    edited December 2018
    Also since your QEE was higher than the scholarships, did your parents claim AOTC for you (and your sister) in 2017?

    Yes, my timing comment was aimed at deciding to amend a 2017 return at this late time, when it is almost time to file a 2018 return, and will delay the FAFSA filing and aid awarding process.

    A change in parent income on the FAFSA of $1,000 nets maybe a $300 change in EFC. Do your parents think this is all worth it if they will pay $1,600 more in taxes?

    Now if they were eligible to claim $1,600 in AOTC (times two?) and didn't, then that would be worth it.

    The simplified method only disregards assets of parent and student. Not cause a $0 EFC.

    You can go to Collegeboard EFC calculator and run the EFC (federal methodology) both ways, and see for yourself.

    Although it is based on 2019/20 EFC formula now, you can still see that change of EFC from $0 to $1,000 tax paid.

    The college reported on the 1098T what was billed in 2017 and scholarships received in 2017. So the end result for 2017 might be no taxable scholarahips based on the 1098T form.

    But it might be that they reported two semesters of billed tuition, and only one semester of scholarships.

    So most likely you will have taxable scholarships to report for 2018.

    I am confused because you said that 2017 is the year you started college, and then you said you and your sister both were freshmen in 2018/19 and sophomores in 2019/20.

    The reason I asked about your sister is because with two in college the FAFSA EFC is halved. If one of you finished college a year earlier, the other one's EFC would double.
    edited December 2018
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  • mommdcmommdc 11256 replies30 discussionsRegistered User Posts: 11,286 Senior Member
    Also, 1098T aside, what kind of aid did you have from your college?

    If the scholarships only paid for tuition, then you could still claim fees and books for AOTC.

    The Pell Grant can become taxable by using it to pay room and board.

    If the EFC was about $2,500 then the Pell Grant was probably around $3,000 so that would be lower than the $6,350 standard deduction for dependent in 2017.
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  • thumper1thumper1 73365 replies3190 discussionsRegistered User Posts: 76,555 Senior Member
    edited December 2018
    @VinnyM

    Are your parents self employed? Or what? What was their total income...and what did they deduct that made up $34,000?

    And...this is very important. While there is a simplified needs test for the FAFSA, there is NO simplified needs test for the Profile. Yes, you might get additional Pell money if your assets really are not counted...but your total aid cannot exceed the cost of attendance. Keep that in mind too.

    Do your colleges meet full need? Will any institutional aid be reduced by your increased Pell amount? Find that out.
    edited December 2018
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  • VinnyMVinnyM 44 replies3 discussionsRegistered User Posts: 47 Junior Member
    @thumper1

    Yes, I will read the thread on quoting messages.

    Sorry for not reading your message on quoting earlier.

    Sincerely,

    VM

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  • thumper1thumper1 73365 replies3190 discussionsRegistered User Posts: 76,555 Senior Member
    @VinnyM

    To qualify for,the simplified needs test...in addition to that 1040A, your family annual income would need to be less than $50,000. With $50,000 in income, how would your parents have $34,000 in deductions...that $34,000 would be the bulk of their take home pay. Right?
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  • VinnyMVinnyM 44 replies3 discussionsRegistered User Posts: 47 Junior Member
    Quoting Message #47 from @thumper1 on 12-30-2018 at 10:25 am

    To qualify for,the simplified needs test...in addition to that 1040A, your family annual income would need to be less than $50,000. With $50,000 in income, how would your parents have $34,000 in deductions...that $34,000 would be the bulk of their take home pay. Right?



    My father was quite embarrassed when he informed me that the $34,000 was paid from savings, liquidation of stock, and credit card debt. (I hope having this information was helpful.)



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  • VinnyMVinnyM 44 replies3 discussionsRegistered User Posts: 47 Junior Member

    I am going to play some ball with my little brother... I will be back soon.
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  • rosered55rosered55 4164 replies124 discussionsRegistered User Posts: 4,288 Senior Member
    I am not a tax expert. But I am confused by the statement that the $34,000 in "deductions" was "paid" from savings, liquidation of stock, and credit card debt. "deductions" aren't paid, and credit card debt is not deductible.
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  • mommdcmommdc 11256 replies30 discussionsRegistered User Posts: 11,286 Senior Member
    I think he was saying that the high medical expenses were paid for with savings and credit cards.

    We are assuming that the bulk of the itemized deductions were from medical bills.

    If the family had only $50,000 AGI, then paying that much for medical expenses from income would be difficult.
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  • rosered55rosered55 4164 replies124 discussionsRegistered User Posts: 4,288 Senior Member
    Thank you, @mommdc. Your explanation makes sense.
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  • thumper1thumper1 73365 replies3190 discussionsRegistered User Posts: 76,555 Senior Member
    @VinnyM

    Are you saying your parents paid for medical expenses beyond what was covered by insurance in the amount of $34, 000 in 2017? And they used savings, credit cards, and stock liquidation?

    @BelknapPoint can someone who has liquidated stock file a 1040A or EZ?
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  • VinnyMVinnyM 44 replies3 discussionsRegistered User Posts: 47 Junior Member
    I was wrong about the stock liquidation. He said it almost got to that or early IRA distributions, but didn't.
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  • thumper1thumper1 73365 replies3190 discussionsRegistered User Posts: 76,555 Senior Member
    @VinnyM

    Do your parents get any dividends from their stocks? If so...how much?
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  • VinnyMVinnyM 44 replies3 discussionsRegistered User Posts: 47 Junior Member
    edited January 1
    Good Morning and Happy New Year.

    My family returned from my grandmother's house around 5:30 a.m. this morning after driving approximately 17.5 hours.

    Prior to leaving, I had reviewed up through Message #44 and drafted a response to those remaining messages that either asked me one or more questions or caused me to ask one or more questions.

    Unfortunately, while packing to leave, I inadvertently responded DO NOT SAVE when closing my working document for this thread having last saved the file only after drafting a response to Message #35.

    My plan is to draft responses to those messages from 36 to 54 that ask me one or more questions or cause me (or my sister or my father) to think of one or more questions all while trying to elimination duplication of answers and questions.

    Wish me luck and Godspeed!

    VM
    edited January 1
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  • VinnyMVinnyM 44 replies3 discussionsRegistered User Posts: 47 Junior Member
    Quoting Message #55 from thumper1 on 12-30-2018 at 5:06 pm...

    Do your parents get any dividends from their stocks? If so... how much?

    @thumper1

    I need to go get the tax info from the car...

    In the meantime, I am curious why that is an important number.

    Thanks!

    VM
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  • thumper1thumper1 73365 replies3190 discussionsRegistered User Posts: 76,555 Senior Member
    @BelknapPoint

    Is there a limit on the dividend income amount to file a 1040a?
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  • BelknapPointBelknapPoint 4318 replies16 discussionsRegistered User Posts: 4,334 Senior Member
    Is there a limit on the dividend income amount to file a 1040a?

    Not that I am aware of. Note that starting in tax year 2018, the 1040A and 1040EZ will no longer be available.
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  • VinnyMVinnyM 44 replies3 discussionsRegistered User Posts: 47 Junior Member
    When MUST You Use Form 1040?
    You must use Form 1040 if any of the following apply.
    1. You received any of the following types of income:
    1.a. Income from self-employment (business or farm income).
    1.b. Certain tips you didn't report to your employer. See the instructions for Form 1040A, line 7.
    1.c. Income received as a partner in a partnership, shareholder in an S corporation, or a beneficiary of an estate or trust.
    1.d. Dividends on insurance policies if they exceed the total of all net premiums you paid for the contract.
    2. You can exclude any of the following types of income:
    2.a. Foreign earned income you received as a U.S. citizen or resident alien.
    2.b. Certain income received from sources in Puerto Rico if you were a bona fide resident of Puerto Rico.
    2.c. Certain income received from sources in American Samoa if you were a bona fide resident of American Samoa for all of 2017.
    3. You have an alternative minimum tax adjustment on stock you acquired from the exercise of an incentive stock option (see Pub. 525).
    4. You received a distribution from a foreign trust.
    5. You owe the excise tax on insider stock compensation from an expatriated corporation.
    6. You owe household employment taxes. See Schedule H (Form 1040) and its instructions to find out if you owe these taxes.
    7. You are claiming the adoption credit or received employer-provided adoption benefits. See Form 8839 for details.
    8. You are an employee and your employer didn't withhold social security and Medicare tax and they were required to do so. See Form 8919 for details.
    9. You had a qualified health savings account funding distribution from your IRA.
    10. You are a debtor in a bankruptcy case filed after October 16, 2005.
    11. You must repay the first-time homebuyer credit. See Form 5405 for details.
    12. You had foreign financial assets in 2017, and you must file Form 8938. See Form 8938 and its instructions.
    13. You owe Additional Medicare Tax or had Additional Medicare Tax withheld and must file Form 8959. See Form 8959 and its instructions.
    14. You owe Net Investment Income Tax and must file Form 8960. See Form 8960 and its instructions.
    15. You have adjusted gross income of more than $156,900 and must reduce the dollar amount of your exemptions.
    16. You received a Form W-2 that incorrectly includes in box 1 amounts that are payments under a Medicaid waiver program, and you can't get a corrected W-2, or you received a Form 1099-MISC that incorrectly reported these payments to the IRS.
    17. You are eligible for the health coverage tax credit. See Form 8885 for details.
    18. You received Olympic or Paralympic medals or United States Olympic Committee prize money on account of your participation in the Olympic or Paralympic Games.
    19. You had a net qualified disaster loss and you elect to increase your standard deduction by the amount of your net qualified disaster loss. See the instructions for Form 4684 and Schedule A, line 28..

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