What Does Income Tax Mean for FAFSA, what is meant by income tax return.#What #is

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What Does Income Tax Mean for FAFSA?

In each of sections concerning the student s and the parents financial information, the FAFSA asks you to report your and/or your parents total income tax liability for the most recent tax year. On the Federal Form 1040 you can find your total federal income tax, which is what you need to report on the FAFSA to answer the income tax question. If you haven t completed your federal return as of the date you re filing the FAFSA, you can use an estimated figure by looking at your return for the most recent tax year you have on record. Doing so, however, may only be accurate if your income has not changed.

Determining which line of Form 1040 lists your total income tax for the FAFSA may be confusing because of the wording both on the FAFSA and the federal return. The last line of the Other Taxes section of the Federal 1040 is usually labeled total tax, making you think this is the number to report. But this is incorrect. Instead, you report the figure listed on the last line of the Taxes and Credits section of the federal return.

In the income section, the FAFSA asks you to report your adjusted gross income (AGI). This means you should report the exact amount from the adjusted gross income line (typically line 37) of your Federal return. If you re estimating your AGI, this includes all taxable income like wages, salaries and tips, self-employment earnings and interest income, with allowances for certain adjustments and deductions. The FAFSA also asks about income earned from work, which is different from your AGI. For this question, you can refer to your pay stubs or W-2 to determine your total raw pay. If you re married, you need to report your and your spouse s income from work on separate lines.

In some cases, questions of dependency may be obvious, but in others less so. For example, if you live at home and are financially dependent on your parents, you report their financial information on the FAFSA. Exactly whose income tax details to reveal may be ambiguous in some situations. For example, your parents may be divorced or separated. In this situation, you report income tax details of the parent with whom you lived with more for the past 12 months. If you didn t live with either parent more, you report the details of the parent who claims you as a dependent on his or her income tax return.

When filling out the financial information section, you may get confused and accidentally report the wrong information. Common errors include reporting your AGI or amount of taxable income for the question about tax liability. Reporting the federal tax withholding listed on your W-2 is another common error when answering the income tax question. Making one of these common errors may trigger an automatic rejection of your FAFSA, which means you must submit corrections to the FAFSA.

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