How to Estimate the Income Tax for FAFSA Before Reporting Tax

Whether it's Feb. 15 or March 1, your school should have a priority filing deadline for the Free Application for Federal Student Aid. This deadline looms up to two months before taxes must be filed, yet the FAFSA asks for tax information. To accommodate this gap, applicants are encouraged to estimate their income tax information and indicate on the application that they will file their taxes at a later date. Once taxes have been filed, applicants can correct their income information on the FAFSA to reflect their actual taxes and best of all, they don't miss the school's priority deadline.

Will File

Tax forms from the previous year are used to complete the FAFSA. For example, your 2012 tax information is used on the 2013-2014 FAFSA application. This information is used to estimate how much income you will make during the school year and ultimately, how much you can afford to pay for the education in question. For students and their parents who have not yet completed their taxes, a best estimate should be used, and the information should be updated on the FAFSA once taxes are filed. Mark your FAFSA with the option that says you will file.

Good Faith Estimate

If your income has not changed since the previous year you filed your taxes, simply use the same amount from your previous tax form as an estimate. If your income has changed, use your paystubs or ask your employer for an estimate. You do not have to be exact, but just get a ball-park figure. The more accurate you make the estimate, the more likely your financial aid will not change much when you make a correction to your income tax information on the FAFSA once you have filed.

IRS Data Retrieval

When you finally get your taxes filed, or your parents file theirs, you can have the information provided directly from the Internal Revenue Service using the IRS Data Retrieval Tool. You can request this by logging back into the completed FAFSA and checking the option to go to the IRS website. Review you information and make sure it is right before clicking the option to send it to the FAFSA. You can request this information three weeks after filing taxes electronically or eight weeks if you filed by mail. By having the IRS provide your tax information directly, you won't have to worry about mistakes and you will not have to turn in a tax transcript if you are lucky enough to be selected for verification.

Common Errors

Errors on the FAFSA can delay the processing or prevent your from qualifying for financial aid you may otherwise be eligible for. Do not leave the income information blank; an estimate is required. Indicate that you have not yet filed. Common errors on FAFSA applications include entering the wrong income tax information. So while guessing is fine, make it clear that you are doing so.

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About the Author

Sara Mahuron specializes in adult/higher education, parenting, budget travel and personal finance. She earned an M.S. in adult/organizational learning and leadership, as well as an Ed.S. in educational leadership, both from the University of Idaho. Mahuron also holds a B.S. in psychology and a B.A. in international studies-business and economics.

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