<p>Yo. This is actually a serious situation my cousin finds himself and I’m hoping people on this forum might know the answer. My cousin’s father, my uncle, owes about $20,000 in back taxes and has about $100,000 in annuities. With figures like that it would seem like it very negatively affect my cousin’s chances for need based federal and institutional aid. My cousin, a senior in high school, asked me what he should do and I told him he may have to apply to fafsa only schools even though the schools he wants to go to require the css profile (He is especially looking at Oberlin and Whitman.). However, I’m not sure if applying to fafsa only schools would help. His father doesn’t live with my aunt and cousin but my aunt and uncle never divorced. Therefore, my uncle’s debt and assets would have to be reported on the profile. How would his back taxes affect fafsa schools and/or css profile? And, also, is there anyone who has any information on how annuities affect financial aid. Thanks in advance.</p>
<p>Someone else will have to reply to this with certainty…but I think your cousin’s dad will need to pay his back taxes before the federal government will award this kiddo any need based aid.</p>
<p>If the parents are separated, I believe this is considered the same as if they are divorced per FAFSA, however. </p>
<p>For Profile schools, it doesn’t matter if they are married or divorced.</p>
<p>I’m not sure what the $100,000 in annuities would do to affect this kid’s financial aid. Is this retirement accounts? Or what?</p>
<p>The single biggest contributor to the financial aid equation is INCOME. So…if your uncle has a substantial income, THAT will impact financial aid at those Profile schools.</p>
<p>But really…I think the question of federal aid and the back taxes needs to be addressed.</p>
<p>Thanks for your response. My aunt and uncle don’t live together but they are still married.</p>
<p>Middlemo, if they are legally separated, then for FAFSA purposes it is the same as divorce. </p>
<p>Your uncle really should either pay his back taxes if he can get cash from the annuities or work out a payment plan with the IRS. (IRS is pretty happy to put people on never-never payment plans – very low monthly payment, very high percentage going to interest & penalties – but it keeps the wolf from the door – otherwise IRS could probably put a lien on the annuity in an enforcement action). I don’t think the back taxes would prevent the kid from getting aid, but they won’t be taken into consideration as reducing the uncle’s obligation – though as noted his income/assets would not be considered at all if the aunt & uncle have been legally separated through the past tax year, and file taxes separately.</p>
<p>Although this is crazy, my aunt and uncle are neither divorced nor legally separated. </p>
<p>Calmom, in the above are you talking about just the fafsa or the profile, too? And wouldn’t the annuities be considered in the dispensing of aid?</p>
<p>Actually, the parents do not have to have a legal separation for FAFSA. If verified, they may have to produce documents to show that they do maintain separate residences though.</p>
<p>I don’t believe that the back taxes are going to be a real issue for your cousin as student aid is awarded in the student’s name. He would file FAFSA, and be awarded any federal/state grant aid and his Stafford loans, with only his mom’s info. When he files Profile, a non-custodial form may be required which would list only dad’s income and assets. FA offices are not an enforcement arm of the IRS (though they will make sure that taxes were filed properly when they verify) nor are they privy to pending litigation or payment arrangements made with the IRS. Your cousin should make sure s/he files FA forms on time regardless of the dad’s tax issues.</p>
<p>If the annuties are not retirement assets, they might affect the Profile EFC - by how much may depend on other assets he has. Not an issue for FAFSA.</p>