FAFSA Reporting Changes
I get many phone calls during the year regarding the reporting of income tax data for FAFSA purposes in order for a child to get financial aid. Many times these phones calls lead to heartburn for both the client and myself. The parent wants to get the data into the college as soon as possible to pin down their aid, however, the tax return is on extension since we are waiting for a schedule k-1 or other information. Also, once the tax return is e-filed it can take several weeks for the information to post.
The Department of Education has issued new rules that make this process be much less of a hassle; however, you have to wait until 2017 to take advantage of it. Beginning in that year, your required FAFSA income tax return will be a whole year in arrears. For example, for the year beginning July 1, 2015 to June 30, 2016, you are required to submit a 2014 tax return. For the next year you are required to submit a 2015 tax return, however, with the year beginning July 1, 2017 you are now allowed to submit a 2015 tax return and you can start submitting the data three months earlier (since the return is a year in arrears, they can move up the initial submission date).
Therefore, for next year and the year after, you can use a 2015 tax return. This should make the process much easier for everyone and now heartburn will only apply when your college team loses to your rival.
Paul Neiffer, CPA