Errors in FAFSA instructions?

Paying for College
1

I was working on the FAFSA earlier, and I ran the DRT to download our info directly from our taxes. I noticed that a few of the numbers didn’t seem right, so I went a-googling and found some support out there for my point of view. Now I’m not sure what to do.

For example, the FAFSA entry for “amount earned from work” takes the number directly from the “wages, salaries” etc. line of the 1040. But in my case, that includes the amount that my S-corporation reimburses me for my health insurance. I don’t pay employment taxes (FICA, Medicare) on that, but FAFSA says to use the number on that line of the 1040. So it results in me getting too LOW an EFC, because I get too much credit for the employment taxes (the FAFSA EFC formula gives me a credit of 7.65% of the amount “earned from work” whereas I only paid 7.65% on a part of that number).

Likewise, for my son, it puts the entire amount from his “wages, salaries” line as “income earned from work,” and gives him a credit of 7.65% of that amount, although it includes some scholarships that are taxable (more than half is taxable scholarships, in his case). The FAFSA formula subtracts out the scholarships from his “total income” but it still uses the full amount to determine how much credit he gets for employment taxes. (Now in his case, I don’t think it matters, he would still have a 0 contribution to the EFC; but in my case, it does matter a little bit.)

So should I correct these to the proper amounts so that the credit I’m given for FICA/Medicare taxes is correct, or should I leave the amounts imported from the DRT? I’m thinking that changing them will raise a red flag (even though we will have a higher EFC) so maybe I should just leave it alone; after all, I’m just following the instructions as they are written.

What do you all think?

2

No, follow the rules and it will calculate it according to the EFC formula.

They can’t make a distinction for every person’s situation.

They have deductions for state taxes, and some people might pay a different amount or none at all, the soc sec deduction takes work income, but it might also include other items, so the number might not be exactly what you pay. They have an income protection amount that goes up with increasing family size, but decreases with more kids in college.
Asset protection amount goes up with increasing age, but is lower for single parents.

There is give and take as far as fairness depending on situation with using one universal formula.

Just follow the instructions and using the DRT should bring over the correct information from tax return, except in the case of rollovers.

Also if you contribute to a 401k, you need to report the contributions from box 12 code D from the W2 under untaxed income in question 94a of FAFSA I believe. This amount FAFSA adds to income, but it is not taxable income for IRS so it does not show up on tax return.

3

https://fafsa.ed.gov/fotw1617/help/faadef23.htm

4

Thanks. Filed today! Now on to the Profile.