Several universities stress the importance of getting you FAFSA completed in January. If we don’t have all of our financial and tax information yet, how can we complete the application that early? The Free Application for Federal Student Aid (FAFSA) should be submitted as soon as possible after January 1st. While the federal government allows you to apply for federal student aid until June 30 of the following year or the end of the spring semester, whichever comes first, several states and most colleges have much earlier deadlines. For example, one state has a mid-February deadline and ten states have early March deadlines for state grant money. There are also five states that award state grants on a first come, first served basis until the money runs out. Some colleges also operate on a first come, first served basis. Other colleges have an earlier preferred deadline in addition to a regular deadline; students who apply by the earlier deadline tend to get more generous financial aid packages. But the FAFSA asks for specific numbers from the federal income tax return and it usually is not possible to file a federal income tax return that early.
- Most people do not receive their 1098, 1099 and W-2 forms until early February. (The IRS deadline for providing these forms to recipients is January 31.)
- This year taxpayers who itemize deductions on Schedule A of IRS Form 1040 will have to wait until mid-February 2011 to file their 2010 federal income tax returns while the IRS updates its tax return processing systems. Congress extended a variety of expiring tax provisions at the last minute through the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (P.L. 111-312, 12/17/2010).
- Taxpayers can obtain an automatic six-month extension of the April 15 deadline by filing IRS Form 4868, Application for Extension of Time to File U.S. Individual Income Tax Return. Such taxpayers might not file their federal income tax returns until October 15.
Do not wait until you have filed your federal income tax returns to submit the FAFSA
Instead, use estimated numbers to complete the FAFSA. You will have an opportunity to correct any errors later and will be required to update the application after your taxes are filed. Be sure to check the “will file” box. The US Department of Education will send an email reminder in April to update the FAFSA information after your federal income tax returns have been filed. Estimates should be based on the last pay stub and brokerage/bank account statements of the tax year. It’s a good idea to review the previous year’s federal income tax return to ensure that you haven’t overlooked a major source of income, such as interest and dividend income, alimony, small business income and rental income. But don’t substitute the previous year’s income tax return for the current year’s income tax return, as the numbers may differ. Try to provide as accurate an income figure as possible, because errors in the income figure can yield big changes in the college financial aid packages. If you don’t update the FAFSA after you file your federal income tax returns, your FAFSA may be selected for verification. During verification you will be required to provide copies of supporting documentation for the numbers reported on the FAFSA. The US Department of Education is using a more targeted verification system which selects FAFSAs for verification based on discrepancies and answers to error-prone questions. This may mean that significantly more FAFSAs will be verified this year. (In previous years colleges were required to verify at least 30 percent of FAFSAs and some colleges voluntarily verified 100 percent of the applications.) If your financial circumstances have changed (e.g., due to a salary reduction or layoff), you should use the figures from the current year’s federal income tax return just as you would if there had been no change in circumstances. After you file the FAFSA, call the college and ask for a professional judgment review (sometimes called a special circumstances review or financial aid appeal). Provide the college with a copy of documentation of the change in circumstances, such as a copy of the layoff notice, as well as information about any severance pay or unemployment benefits. The college financial aid administrator has the option of switching the FAFSA from prior tax year income to estimated award year income.