<p>I have a son who is applying ED to Cornell Arts and Sciences. We will be applying for financial aid. We decided to let him go for ED based upon the number we got on the NPC, which we were very comfortable with. If the award is anywhere near what the NPC said, we will be fine.</p>
<p>It was suggested to us (by a financial person familiar with college FA) to call the Cornell FA office NOW and ask if they could possibly give us a rough estimate of what my son might get (if he is admitted). The reason this was suggested to us is because our income for 2014 will be a lot more than it was for 2013. NOT because we are in a better financial position, but because we had to take a substantial withdrawal from our IRAs in order to meet our living expenses and pay our 2013 income taxes. (We had some job losses during the financial meltdown and are still trying to recover. Also, our income wasn’t particularly high even before the meltdown.)</p>
<p>Anyway, I am wondering if any of the experts on this board think that this is a good idea to call the FA office in advance. I am worried about calling attention to our situation and having the FA people tell the admissions people that we are too much trouble. In other words, I feel like it’s best to be quiet and compliant before the admissions decision, and then appeal the FA if necessary. Then again, it would be nice to know, before we pull the trigger on ED, if Cornell will understand our “higher” income is not really higher income.</p>
<p>Some schools will give you an early read on financial aid, and others simply will not. Call Cornell and ask.</p>
<p>What you are actually hoping for is a special circumstances review of your financial aid application. You want this, I think, because you want them to consider that your 2014 income is atypical because of the IRA withdrawals and the like. </p>
<p>To be honest, with this complication to your financial aid application, I’m not sure ED was a good option. I was under the impression that these reviews only take place after the student has been accepted and received their award. When applying ED, you don’t get much of a window between the acceptance and being required to accept the offer. If you ask for a review you will also need to ask for an extension for that acceptance decision. I don’t know if Cornell will say yes, or no to that.</p>
<p>When you did the NPC, did you use the higher income from 2014? And with that higher income, did it look affordable? If so…you might be OK.</p>
<p>Or did you use your lower 2013 income? If that, your financial aid won’t reflect that higher 2014 income.</p>
<p>Does withdrawal from an IRA count as income? </p>
<p>I thought that although it was assumedly not taxed going in, it still was reported previously as income, so an early withdrawal would not count as income.</p>
<p>Sort of similar, an inheritance would not count as income, because it was taxed on the front end, correct?</p>
<p>Taxed on the front end - I think meaning subject to income tax during the decedent’s lifetime.</p>
<p>An example of an inheritance that is subject to income tax is distributions from an inherited (non-spouse) traditional IRA (income in respect of a decedent).</p>
<p>If these are traditional IRAs originally started as IRAs, then an IRA deduction may have been taken when contributions were made, therefore not taxed or only partially taxed. If partial IRA deductions were taken or no IRA deduction was taken, form 8606 is used to determine how much of the distribution is taxable. Likewise if the IRAs are from 401k rollovers then the contributions were made pre-tax. In either case the taxable amount of the distribution goes on line 15b of the 1040 and is included in AGI. </p>
<p>I’m confused about an inheritance though. Some places say no, it’s not counted as income but if you put it away, it counts as an asset. Other places say yes, it is income, but the IRS does not consider it income for the person receiving an inheritance.</p>
<p>Correct, if the original IRS contributions were tax deductible and therefore not previously subject to income tax. The beneficiary takes the place of the deceased “retiree” in receiving distributions. Most inheritances, however, are tax free gains. This includes real estate, bank accounts, CDs, stocks, bonds, mutual funds, personal property and cold hard cash.</p>
<p>If the FA office I work out called admissions about every student or family we thought was being obnoxious or bothersome, there would hardly be any students admitted to my school. If you were to call ahead, I don’t think you would need to worry much about FA communicating with admissions.</p>
<p>As I’ve noted, I teach, and I get emails on occasion that say “sorry to bother you”. HELLO!!! My job is to help students, if they bother me, I’m in the wrong profession!</p>
<p>I wish those at my daughter’s school would talk more to the other departments. If I want t o talk about merit aid, that’s admissions. Except Bright Futures which is the special BF person. Special FRAG person. Special Fl prepaid person (we don’t have it, but I was directed to her anyway). Special loan person. Special pay person. Special housing person…No one seems to know what the other person does or how to fix a problem that isn’t his specialty.</p>
<p>Go on ahead, call and ask. They may help you out; they may just refer you to the NPD. I also suggest that you rerun the NPD with an estimate of what you think your AGI will be in 2014 based on your income to date and extrapolating to the end of the year including that IRA distribution you took which you will have to report on your 2014 1040 forms and pay tax on those amounts. Though NPC instruction often say to use the prior year income and numbers from the actual return, you should update those numbers with thing you know will be different, like that distribution. </p>
<p>You know you have to pay taxes on that distribution if it’s a regular IRA don’t you? And if you might have to pay a 10% penalty tax as well. </p>
<p>Let me be clear here: Cornell and any other schools is going to look at that IRA distribution as additional income unless you can make a case to them that it was a one time hardship withdrawal, and I don’t think your reason of needing to pay taxes is going to necessarily fly. For a sudden medical or employment or other catastrophe, you can ask for a professional judgement waiver that I’ve seen allowed. But for paying taxes, ummm, I don’t know. I wouldn’t bet on it.</p>
<p>If adding that withdrawal to your income shoots up your expected contributions to make Cornell unaffordable, it is likely it will do the same to any number of schools since the rules about IRA withdrawals are pretty uniform, and Cornell does give good aid. So you might want to rethink ED, and also start looking for other college options more affordable. I don’t know how much you took out, but hits to any income on EFC, both FAFSA and institutuional are high. </p>
<p>Thank you everyone. @cptofthehouse I know the distribution will add to income. However, because of job losses we have taken distributions here and there to help us get by. Our earned income is all as independent contractors, so no taxes are taken out, and we need every penny. That’s why we withdrew from IRA to pay taxes. It would have been the same thing if we"lived off" of the IRA withdrawals and sent in quarterly tax payments “from our paychecks.” What’s the difference? So bottom line is that the distribution WAS because of a job loss/unemployment. Also, the income is not repeatable. We have nearly liquidated our retirement just to stay afloat. So there is just no money there. After laying out all our accounts, I would want to ask the FA people to identify the funds with which we should pay the tuition bill. Yes, we recognize that we took a distribution last year, but we cannot replicate it.</p>
<p>It will be up to the college to determine what to do. Some will be more accommodating than others with regard to your situation. Some will consider the retirement withdrawal as a one time event (but your post implies that this has happened more than once) and others won’t adjust at all. Just be prepared for this.</p>
<p>Honestly, you have significant financial issues when it comes to college. In addition, you are self employed which adds to the discussion. Note that the net price calculators are not accurate for the self employed.</p>
<p>I’m going to ask a question…what is more important…an ED application or the ability to compare bottom line costs from a number of colleges? On,y you can answer that question.</p>
<p>If your daughter gets accepted ED, you will have only that ONE offer to consider when making that decision to accept or not the offer of admission. This might be your best offer. OTOH…this offer could be thousands of dollars different from any number of other colleges…and you will never know if a better financial offer would have been available for your daughter and family.</p>
<p>OMG, call the FinAid office! Cornell is CSS profile school. They look at more than just the FAFSA. The fact that your earned income is low and you’ve liquidated your retirement savings to stay afloat, will probably work in your favor. </p>
<p>If you own a business, if you are thinking about requesting a professional judgement for the IRA distributions, if you are thinking about filing as a dislocated worker, all of which I think is relevant in your situation, yes, do contact Cornell finacial aid office and ask if they will do an early read due to the inapplicability of the NPC to your finances. Independent contractors, professional judgement requests can skew the NPC terribly. </p>
<p>I have no idea if Cornell will do this for you. they may tell you that you just have to send the stuff in and they will evaluate it all during the ED procss, and if you don’t like or can’t do Cornell with the estimated package they offer and can’t get it revamped, you would be permitted to withdraw your ED app. </p>
<p>Bear in mind, however, that any of the NPCs are not likely to be accurate for you, and finding a school that would look at the situation differently from Cornell if they hit you hard is going to be a challenge. </p>
<p>FA is not interested in identifying the funds with which you should be paying your tuition bill. Take a loan–PLUS or a cosigned one, or sell your house and move into a trailer. </p>
<p>Also was the distribution taken in 2013, last year, or 2014, this year? Fin aid will be based on 2014 actual income . AGI with some adjustment, possibly involving Independent contractor adjustments as well. </p>