.
c. If such a refund is considered taxable it has to be declared as income on your federal tax refund and the only form you can do it on is the 1040. You cannot file 1040a or 1040 ez which means you are ineligible for the simplified needs test. Does not sound like it applies to you if you filed 1040a.
Sorry if I caused confusion</p>
<p>^^^^ just wanted to point out I am not any sort of tax expert - my original post was just pointing out the odd little things that can have an impact on your EFC - this particular tax situation affected us and made us ineligible for simplified needs which is why I mentioned it.</p>
<p>Posters here are correct. Although I am no tax expert. The Federal Tax refund is not taxable in the subsequent year. Your State Income Tax refund is.</p>
<p>But, dont say that you aren’t too bright. Paying off the house early can be a great thing. Having zero debt absolutely is. If your goal is to pay off the house with the $6K when you get your Tax refund…You get even more of a bang for your buck by paying the extra on the principle on a monthly basis.</p>
<p>Google mortgage amortization. You’ll see what I mean. I have no intention really to give you financial advice, but I guess you would be able to find an investment, or some way of using that $500 a month without letting the government use it for you. Good luck.</p>
<p>Our house has been paid off for a year now accually, we plan to take this Refund & buy a newer Suburban, ours is almost 20 yrs old & literally falling apart. Now I am confused again… so we are supposed to count our State tax Refund in the next years as income?? We have always gotten back about $1,000 each year and never did this. We get “Tax Forgiveness” (I believe that is what it is called) or something due to dependants & income. You must be talking about something else, mentioning those deductions , we don’t deduct anything but our kids & 401K on any taxes, Federal or state (I don’t think you are allowed to deduct that on there?). I say we are not bright because we have been socking $3,000 to $4,000 a year into an 401K plan at work-picking certain so called “safe” investments (we only have so many to choose from) and over apprx 7 years, it is only approx $28,000 right now. It seems to me, when you read about investments, they make it sound like you will be making a mint, how it really adds up, where as it seems to us, we might have been better off doing CD’s. Investing in something we do not understand does not seem to work for us–at all. We continue the 401K just because we can deduct that amount from being taxed every year, not because it is doing well. I guess I need to take a course on how to interpret & change mutual funds or whatever within a 401K. I’ve tried to read & understand, I just do not get it.</p>
<p>Ok I see it says this… “State tax refunds MAY have to be declared as income in the subsequent year IF you itemized deductions on your federal tax”—which we don’t/never have, so for us, it is not counted as income and needing to be taxed again. How you people undertstand all this, I will never know. What a MAZE!!! Itemizing seems to open up a whole can of worms, I am not interested in doing that no how, no way. I am perfectly happy with getting what we get back each year , even if I do let the Government use it for months. Having this many kids is what saves us at Tax time, I would not try to squeeze anymore. I guess if I made ALOT of money & was paying out the butt, I would feel different and do all of those things though. Even if I had to pay someone to figure it all out. As for us, we muddle along doing all this complicated stuff ourselves-- cause we are too cheap to pay someone to do it for us. Another reason I am starting these “Paying for College” questions EARLY because I do not want to have to hire an Accountant for Advice on filling out these forms, doing it on time, etc. I really really really appreciate all of your help !!</p>
<p>More questions (so sorry!)… This thing called a “Simplified Needs test” - how is one eligable for this, is this learned once the Fasta is being filled out, can this be determined BEFORE the Fasta is filled out, I googled “Simplified Needs test FAsta” but found nothing. Why is this different /set apart from the normal Fasta?</p>
<p>It is FAFSA (not Fasta)… try googling again; you should come up with lots of info!</p>
<p>There were changes a few months ago…for example I think if your children receive free/reduced lunch or other federal aid, and your income is under $50K, that also qualifies you under the Simplified Needs Test.</p>
<p>Accually my 4 kids in school DO qualify for the Reduced Lunch program, and I get WIC for this pregnancy/baby. Nothing else though. Plus we use the
1040A every year, I seen that was something you had to be eligeble for. I am learning alot here, writing things down in my book “Straight talk on paying for College”, it is out of date though (2003). I told each of my kids I would pay $10,000 for their education… now when it comes time (after financial aid, grants, etc) for those loans, it is better to get Loans in parents name, or kids name, or can you do both? I planned on doing both. Does this complicate things ???</p>
<p>OverRunwithsons - one of the best sites for starting to look for information is finaid.com . They have a calculator that lets you enter your number to get an idea of what your EFC would be. They also have information about the various different types of grants (Pell, Seog etc) and loans (Stafford, Perkins, plus etc). Some loans are for students & some for parents. Some are based on financial need and some are not. Some you have to start repaying immediately and some you do not have to start repaying until after graduation. Here is the link to the finaid page about loans:
<a href=“http://www.finaid.com/loans/[/url]”>http://www.finaid.com/loans/</a>
Also check out your State education web site. Our State has some additional grant programs for students that qualify for federal aid & yours may also.Finaid has a page with links to State web sites.
<a href=“http://www.finaid.com/otheraid/state.phtml[/url]”>http://www.finaid.com/otheraid/state.phtml</a></p>
<p>If you make under $50K and are eligible for reduced lunch/WIC and filled out the IRS 1040A…I think you qualify for the Simplified Needs Test. Do the research (<a href=“http://www.finaid.com%5B/url%5D”>www.finaid.com</a> is a good site) and make sure you know what you need to know before filling out the FAFSA next year.</p>
<p>If your son is a junior, then this is his “base year” (Jan 1 junior year to Dec 31 senior year). Just make sure you understand the rules and you don’t do anything goofy (meaning: some seemingly innocent financial decisions can impact your EFC).</p>
<p>You can also pick up a 2007-2008 FAFSA on the Web worksheet at the library. This way you can get an idea what the questions are and it makes filling out the real thing a lot less confusing.</p>
<p>I was going to take a Financial Aid class through UCLA extension (decided not to) but the required text was Collegeboard Meeting College Costs. I haven’t read the book yet, but it looks helpful.</p>
<p>My son is in 10th grade right now. Give me some examples of “seemingly innocent financial descions” that can affect the EFC in that Base year? Do you mean like allowing him to work a summer job - in case it would bring his income & ours combined over the $50,000 mark? I was going to let me get a job THIS summer ONLY. (Between 10th & 11th grade) as this would not affect our income. Good idea? Thoughts?</p>
<p>For example, if there are any savings in your son’s name or in a UTMA account (“Mom as custodian for Junior”), you should figure out how either to spend it or to transfer it into your name. Assets in the student’s name are “taxed” at 20% or so available for college, while assets in the parent’s name are “taxed” at 5% or so.</p>
<p>A job between 10 & 11 grades won’t affect FAFSA, except to the extent that he saves the money in his own name. If he wants to save it, you should put it in your account and let him draw on it as needed.</p>
<p>The student can earn @ $3,000 in a year without it affecting the EFC. Anything over that is hit at 50%. So him getting a summer job should not be a problem. His earnings do not matter to the $50,000 - that is parents only. Any savings in the students name are hit at 20%. Savings in parents name are hit at @5.6%. However if you qualify for simplified needs test assets are not considered.
The links I posted to the formula guide and to finaid contain some useful info. As you have a while to go (wish I had thought to look at this stuff so far ahead!) make sure you recheck the rules/formulas every year as they are subject to change.</p>
<p>I understand you are trying to learn the financial aid process but I think telling a kid not to work so he gets more financial aid is sending the wrong message.</p>
<p>I am not telling him not to work, I just would not want to have him make a measley $1,000 & that set us up for being Over this $50,000 if the case-now that I see he can make $3,000 and it not affect anything, this helps. (though he would be lucky to even get a little over $1,000 at any summer jobs around here --very depressed area). If you seen how far we lived from town & How many trips we have to make it there & back, not to mention his other activities a day, you would understand he will hardly make anything (after taxes, gas, wear on the Suburban & time) for a few hours minimun wage. Plus we are constantly running him to other Church activities & Cross country activities. I have to decide if it is even worth it. If we lived in the city, it would be easier & more cost effective to get a small job & keep it year round. He almost needs his own car to accually work considering where we live, and I am not really ready to dish out that kind of money just yet. Everyone has a different situation. Please don’t think I am out to screw the system here. But at the same time, I do not want to be stupid and have him earn another $500, then we do not qualify for the Simplified Needs test.</p>
<p>Honestly, I would tell my kid not to work if all he is getting after the FA hit is half minimum wage, and having to drive there, etc. Kids have to learn about the law of diminishing returns, too, you know.</p>