FAFSA Tax Return Requirements | H&R Block

October 12, 2017 : Gil Charney

Completing the “Free Application for Federal Student Aid” or “FAFSA” can be a daunting task for any student. Particularly those applying for the first time. You can certainly start by visiting fafsa.gov and diving right in, however, it’s best to have an idea of what information you’ll need.

The Federal Student Aid website clearly explains the FAFSA process here.

Where is the tax return used in the FAFSA application?

 

One of the key elements of the FAFSA is a series of questions about your tax return, and your parents’ tax return if your parents claim you as a dependent. How do you know if you’re a dependent? The FAFSA will ask questions to guide you. You are most likely considered a dependent if:

 

  • you’re under 24 and a full-time student
  • you do not pay most of your expenses with your own money, and
  • you live with at least one of our parents.

 

If you are a dependent, any reference in this article to “your return” means both yours and your parents’ tax returns.

 

If you’re not a dependent, you need only your own tax return for the tax year that is two years prior to the start of the academic year you’re applying for. That means for the 2017-18 school year, you’ll need your 2015 tax return. For the 2018-19 school year, you’ll need your 2016 tax return, and so on.

 

What is the Data Retrieval Tool (DRT)?

 

You may not be familiar with many of the tax terms that FAFSA mentions, such as “adjusted gross income” and “tax-exempt interest income.” The good news is that the DRT provides this information for you.

 

Due to data security concerns, the not-so-good news is that the tool is not actively available. The DRT is expected to return starting October 1, but only for FAFSA applications filed for the 2018-19 school year.

 

What should you do to complete a 2017-18 FAFSA? Unfortunately, you’ll need to manually enter the tax information from your 2015 tax return. Visit the Federal Student Aid page to review “How to Fill Out the FAFSA® Form Without Access to the IRS DRT.” This useful roadmap tells you exactly where to find each of the FAFSA entries on the 1040 series tax returns.

 

What if I can’t locate my income tax return?

 

The IRS and Department of Education have been working together to help students and their families locate the tax information needed for submitting the FAFSA. You may be able to access your return through the tax software you used, or get a copy from your tax preparer.

 

You can also use the IRS’s Get Transcript tool to find the crucial numbers you need. The FAFSA roadmap linked above also tells you how to locate the tax information required from the tax transcript.

 

 

If you did not file a tax return for 2015, you will need to certify this in your college application. You will likely need to provide copies of your Forms W-2 and disclose any other income sources you receive.

 

 

Why does FAFSA need my tax information?

 

When applying for a federal loan to help pay for your education, the government needs a snapshot of your finances (or your parents’ finances). Some financial information comes from your checking or savings account balances, but your tax return provides a crucial part of the financial picture – your income.

 

There is no income cap or particular types of income that will automatically disqualify you. However, your income is certainly taken into consideration when applying for federal aid, so make sure your answers are correct before you sign and click submit!

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Gil Charney

Gil is the Director of Tax Law and Policy Analysis for The Tax Institute at H&R Block.