Fafsa/f8863/f1098-t

[BP.]

FAFSA- Always some early hustle to get tax returns done so people can do their FAFSA forms. I don't have experience with completing the FAFSA, but in the past I understood one could complete the form with prior year tax estimates, and then update the FAFSA when the current year's tax return was complete.

Client told me that this year if you answer the FAFSA question that you haven't yet completed your taxes, you can't continue on the FAFSA form. Does anyone know if this has changed? It may explain why I have some people that seem quite anxious to get their taxes done ASAP this year in anticipation of the FAFSA.

The Form 8863 sure has changed. Form & Instructions here:

http://www.irs.gov/pub/irs-pdf/f8863.pdf

http://www.irs.gov/pub/irs-pdf/i8863.pdf

And the 1098-T finally may be useful for something . . . the 8863 needs the name, address and EIN of the schools, found on the 1098-T. The 2012 Form 8863 (line 22) also asks for info about the prior year 1098-T!

I need to do some homework on this today. I have loads of clients who file 8863's.

[Burke]

My experience with this last year suggests that schools are matching the FAFSA info with the actual transcript of the tax return with the IRS. In other words, not even accepting a printed copy of the 1040 from the applicant. So the issuance of financial aid is held up until this can be accessed. And even though we have confirmation of efile acceptance, it is maybe a week or two or longer before they can see it. Longer for paper-filers.

[KBTS]

My experience with this last year suggests that schools are matching the FAFSA info with the actual transcript of the tax return with the IRS. In other words, not even accepting a printed copy of the 1040 from the applicant. So the issuance of financial aid is held up until this can be accessed. And even though we have confirmation of efile acceptance, it is maybe a week or two or longer before they can see it. Longer for paper-filers.

Last tax season, a client called me and was all upset because the school was demanding a tax transcript for financial aid purposes. We had just filed their return, so there was no way to get it that quickly. They called the school back and eventually the school accepted a copy of the 1040 instead. If this is going to be the new trend, it is just one more hassle to deal with during tax season!

[Burke]

It's the government's way of eliminating fraud, since anyone can fill out a 1040 with anything. They are going to the horses' mouth, so to speak. I don't have a problem with it, given today's world.

[Koss]

Fafsa

Burke wrote:

My experience with this last year suggests that schools are matching the FAFSA info with the actual transcript of the tax return with the IRS. In other words, not even accepting a printed copy of the 1040 from the applicant. So the issuance of financial aid is held up until this can be accessed. And even though we have confirmation of efile acceptance, it is maybe a week or two or longer before they can see it. Longer for paper-filers.

The Department of Education is in fact using a process that pulls data directly from the IRS. It is known as the IRS data retrieval tool. But it is not mandatory. Applicants can choose to use the retrieval tool, or enter their tax data manually. Some applicants are not even eligible to use the tool. For those that are eligible, it is definitely makes the processing of the application a lot faster. But it is not required. And it will not even be up and running until February 3. Here's a link to the information on the FAFSA website:

http://www.fafsa.ed.gov/help/irshlp9.htm

BP wrote:

Client told me that this year if you answer the FAFSA question that you haven't yet completed your taxes, you can't continue on the FAFSA form.

That's not correct. Your client may be getting a screen that stops them, with a message that strongly recommends that they wait until they have completed their tax return before filling out the FAFSA. But the applicant is allowed to continue.

BP wrote:

... in the past I understood one could complete the form with prior year tax estimates...

Not prior year data. They want you to use an estimate of the current year, i.e., 2012. For most people, it is as simple as entering gross income from Form W-2. Yes, there's a little bit more to it. You have to choose a filing status, and the number of dependents, and indicate whether the applicant is claimed as a dependent by the parents, etc.

Someone who is self-employed, or has rental income or something, might have to use prior year figures as a guide.

Here's what it says in the official FAFSA instructions:

If you (or your parents) need to file a 2012 income tax return with the Internal Revenue Service (IRS), we recommend that you complete it before filling out the FAFSA. If you have not completed your return yet, you can submit your FAFSA now using estimated tax information, and then correct that information after you file your return.

The easiest way to complete or correct your FAFSA with accurate tax information is by using the IRS Data Retrieval Tool through www.fafsa.gov. In a few simple steps, you may be able to view your tax return information and transfer it directly into your FAFSA.

If your client argues with you, you can print out the instructions. The FAFSA is still available as a traditional paper form. It is still possible to file it by mail. Here's a link to the PDF:

http://www.fafsa.ed.gov/fotw1314/pdf/PdfFafsa12-13.pdf

This is a bunch of bull. The news media and the IRS website are full of stories about how a lot of taxpayers can't file until late February. Financial aid officers should be aware of this.

I don't want to lose clients. There is certainly a need to be diplomatic about this. But I won't be bullied by clients with inaccurate information, and I won't allow my clients to be bullied by financial aid administrators and staff.

BMK

[BP.]

Great info, All! Thanks. Yes, I understand client/applicant now might need to present an IRS transcript for financial aid.

[Burke]

Thanks Koss. I knew the FAFSA said you could do estimates. But apparently many schools are not accepting that, because I had them hold up decisions based on receipt of the transcripts last year.

[BP.]

Thanks Koss. I knew the FAFSA said you could do estimates. But apparently many schools are not accepting that, because I had them hold up decisions based on receipt of the transcripts last year.

And that seems to be what people are freaking out over. If they don't file a 1040 & FAFSA ASAP, they're afraid they're missing out on first-come-first-served money. As Koss noted, diplomacy without allowing ourselves to be bullied . . . do I really need to work another social skill at this point in the season? (That was written in sarcasm font.)