FAFSA 101: Your Guide to Financial Aid

Tax Planning Stocksy_txp024297a60gM000_Small_556005

Higher education has gotten more and more expensive each year. Fortunately, financial aid has increased as well and the best way to get it is by filling out a Free Application for Federal Student Aid, or FAFSA.

Completing the FAFSA can open the door to $150 billion in government student aid. That’s a lot of student aid.

In order to get access to that student aid, you’ll need to fill out your application accurately, which includes providing correct income tax information. Mistakes can be costly so here are a few of the commons ones you should avoid.

Common Mistakes to Avoid When Applying for FAFSA

The FAFSA is an application for government benefits so it’s important you get it right. You might be tempted to fill it out with estimates or guesses, but if you complete the application with inaccurate information, assuming it’ll slide, you can invalidate your application.

What are some common mistakes?

Not having your information when you complete your application. Have you and your parents’ income tax returns for the most recent year. You can import this information directly from the IRS using the IRS Data Retrieval Tool (IRS DRT), otherwise you‘ll need copies of those tax returns. If you or your parents have not filed your income tax return for the most recent tax year, you can make an estimate of how much you anticipate it will show. Then, update your application with the actual numbers two weeks after the returns are filed.

Inputting the wrong information. This is a risk anytime you are completing any type of application, but mistakes can delay your student aid so you need to avoid them at all costs. For example, since it is a government application, you must enter your name exactly as it appears on your Social Security card.

Not including your parents information. Student applicants sometimes make the mistake of assuming that they only need to put their own information on the application if they are fully self-supporting, but that’s not how FAFSA works. You must enter your information and that of your parents and let FAFSA determine if you are a dependent or not. FAFSA uses different criteria than the IRS does to determine dependency.

Not signing the application. Even if you fully and accurately complete every question on the FAFSA application, if you fail to sign the application it won’t be delivered. This also extends to including your PIN with your application. And naturally, your parents will also need to sign the application and include their PIN as well. Failure to do either will invalidate the application.

Not obtaining a Personal Identification Number (PIN). Akin to providing inaccurate or incomplete information, you may not obtain a PIN under the mistaken assumption that it isn’t really necessary. It is. Like your official name, Social Security number and accurate income information, if your PIN – and your parents PIN – is not included, your application will go nowhere. If you don’t have a PIN, or have forgotten it, you can get a new one at the federal student aid PIN Website.

Using Your Tax Return to Complete Your FAFSA Application

Your application will depend on your income information, and that needs to match what the government has on file with the IRS. Your financial information will need to come directly from your tax returns, so follow these steps.

You don’t need to send your tax returns. Your application requires certain information from your tax returns, but not the tax returns themselves. It is possible however that the school may request your tax returns so that they can verify your income information. If they do, be sure to send the returns to the school only.

Use the IRS DRT whenever possible. You can use the tool as long as at least two weeks have passed since you and your parents have filed your income tax returns with the IRS. The tool can be accessed from the finance section of your application, and it will take you directly to the IRS website. There you will provide certain information (as it appears on your tax return) that will enable you to review the tax information before it’s transferred to your application. Once you return to the FAFSA application, the financial information from your tax return will be filled in automatically. By using the IRS DRT you eliminate the possibility of making mistakes that can cause your application to be delayed or even rejected.

Use the IRS DRT if you have used estimated income. If you used income estimates on your application because you haven’t filed your income tax return, or because not enough time has passed since you did, you should use IRS DRT to provide the actual numbers once they are available in the system. In order to update your financial information, you simply need to go the Make FAFSA Corrections tab, and confirm that your taxes have been filed. You will then be directed to follow the instructions to the IRS DRT, to transfer the tax information just as you would have if your returns had been filed before you applied.

Why you may not be able to use the IRS DRT. There are certain circumstances where you may not be able to use the tool. This will happen if you indicate that either you haven’t filed your return yet, or if you indicate that you aren’t filing a tax return. That could happen if your income will not be sufficient to require filing under IRS rules. But it can also happen if your marital status changed during the tax year, or if you or your parents filed an amended tax return for the year. If that is the case, you will need to enter the financial information manually.

Keep all of these strategies in mind when completing the FAFSA, and the process will go smoothly, and you’ll get any aid you’re entitled to more quickly.

If you need to apply for financial aid and haven’t filed your taxes yet, you can quickly and easily file your taxes using TurboTax so that you can finish your application for financial aid.

Leave a Reply