Tax Questions

• Both the Step Two and Step Four sections of the FAFSA contain income tax filing questions. Step Two is related to your personal tax return, if applicable, and Step Four relates to your parent's return. Each step contains similar questions relating to income reported and credits claimed. The application process will direct you to the set of questions you should answer.
  
  

Basic Income Tax Questions

• Both Step Two and Step Four ask for basic income tax information in their initial questions. You are asked if you or your parents have filed a tax return for the most current tax year and the type of form you used to file. If you have filed your tax return, the form asks for your household's adjusted gross income, income taxes paid and number of exemptions claimed. The FAFSA directs you to the specific lines on your tax return that contain this data.
  
  

Additional Financial Information

• The FAFSA also has you refer to your income tax return for information on credits you may have claimed and funds paid and received. Under the additional financial information questions, you must provide data from your tax return on education credits claimed, child support paid, taxable income from need-based employment programs, taxable grants and scholarships reported in your adjusted gross income, combat pay, special combat pay and college-operated cooperative education program earnings.
  
  

Untaxed Income

• The final questions asked that require referencing your income tax return are related to untaxed income. You must list the following on the FAFSA: child support received, payments into tax-deferred pension and savings plans, IRA deductions, tax-exempt interest income, untaxed portions of IRA distributions, untaxed portions of pensions, living allowances, veterans non-education benefits, other untaxed income reported to the IRS and money received not elsewhere reported.
  
  

Tax Information Uses

• Most of the income tax questions on the FAFSA are asked to gather information about your or your parent's income and overall financial situation. This information is a key part of the Department of Education's formula for determining your expected family contribution (EFC) for college. Further, the basic tax questions asked in Step Two and Four of the FAFSA are used to determine whether or not you qualify for the simplified EFC formula. Students from households that are able to file a 1040A, 1040-EZ or do not have to file any income tax return may qualify for simplified EFC formula use.