What are your chances of acceptance?

Your chance of acceptance
Duke University
Loading…
UCLA
Loading…
+ add school
Your chancing factors
Unweighted GPA: 3.7
1.0
4.0
SAT: 720 math
200
800
| 800 verbal
200
800

Extracurriculars

Low accuracy (4 of 18 factors)

A Parent’s Guide to the FAFSA: Parent Financials

This article was written based on the information and opinions presented by Vinay Bhaskara in a CollegeVine livestream. You can watch the full livestream for more info.

 

What’s Covered:

 

 

Parent Tax Filing Status

 

When you begin the “Parent Financials” section of the FAFSA, you will first be asked about the parent tax filing status. If the parent taxes for that filing year have already been filed, click “already completed,” and you can then enter which tax form was used and the parent tax filing status. On the other hand, if the parent taxes have not been filed, you will either select “will file” or “not going to file.”  

 

IRS Data Retrieval Tool

 

After filling out parent tax filing status information, parents will either manually enter their financial information into the FAFSA form, or will be able to automatically transfer information from their tax form into the FAFSA via the IRS’ Data Retrieval Tool. Eligibility for this tool depends on parent tax filing status. 

 

Married folks who file as married filing jointly, or single parents filing single or as head of household are able to utilize the IRS Data Retrieval Tool. Parents who are married but file separately or as head of household, or parents who live together but are unmarried are unable to use this tool.   

 

Parents who are eligible to use the tool can click “Proceed to the IRS” to transfer their tax information into the FAFSA. This can make life a lot easier by automatically and accurately filling in information that you would otherwise have to carefully fill out using the 1040 form. 

 

Parent IRS Information

 

Adjusted Gross Income

 

If you are unable to use the IRS Data Retrieval tool, you will instead manually enter your tax information into the FAFSA, line-by-line. Keep in mind that this section is asking for parent financial information. There is a separate student financial information section later on in the application. 

 

You will first be asked to enter your AGI, or “adjusted gross income.” You can either pull this from your IRS 1040 form directly (for the 2021 IRS 1040 form, this is on line 11), or you can use the FAFSA’s tool to estimate your AGI if you don’t know it. 

 

Parent Income from Work

 

After entering your adjusted gross income, you will be asked about parent income from work. In the corresponding box or boxes, fill in the amount that was received from working for each parent. If the parent filing status is married filing jointly, you will be asked to include income information from both parents. 

 

Parent Simplified Path Determination and Income Tax Paid

 

You will next be asked about the IRS Schedule 1 form to determine your simplified path eligibility. Parents who did not file a Schedule 1 form here can click “no” and move forward to the “Parent Additional IRS Info” page, where they will be asked to enter their income tax paid. 

 

If you filed a Schedule 1 form, you will click “yes” here unless you only filed to report the following: unemployment compensation, educator expenses, IRA deduction, student loan interest deduction or Alaska Permanent Fund Dividend. By clicking “yes” to this question, you will then be prompted to answer additional questions regarding your Schedule 1 form before moving forward to the “Parent Additional IRS Info” page and income tax question.

 

Parent Questions for Tax Filers Only

 

The next set of questions refer to special circumstances such as combat pay, student grant and scholarship aid reported to the IRS, untaxed portions of IRA distributions and pensions, and tax-exempt income. The fields in this section contain a lot of complexity, so we suggest that parents utilize the IRS Data Retrieval Tool if possible to avoid mistakes here.

 

Parent Assets

 

Reporting Assets

 

Next up, you have questions about parent assets. It’s worth noting here that while you can technically choose to skip these questions, many folks are not actually eligible to skip them. This section asks parents for three things: a total balance of cash savings and checking accounts, the net worth of their investments, and the net worth of their current businesses or investment farms.

 

The net worth of investments includes real estate and rental properties, but not the parents’ primary residence. For any real estate with a mortgage, parents should include the net asset value. For example, if you have a rental property worth $500,000, but there is still $300,000 left on the mortgage, then your net asset value is $200,000. 

 

Additionally, investments like brokerage accounts, stakes in companies, and 529 plans are included in the net worth of investments, but 401k plans or IRA plans are not. To report the net worth of a business, parents can use an evaluation like a public valuation or a 409A valuation.

 

Parents with businesses or investment farms (excluding family farms) with more than 100 employees also need to include that asset value in this section. 

 

Next Steps

 

It is important that parents save documentation of the value of bank accounts, investments, and businesses so that these documents can ultimately be shared with colleges as supporting financial documentation. 

 

After parents complete the “Parent Assets” section, there is just one section remaining before you are ready to sign and submit the FAFSA, the “Student Financials” section.

 


Short Bio
At CollegeVine, experts host weekly livestreams on college admissions topics, including application advice, essay writing tips, and college information sessions. To register or check out more livestreams, visit www.collegevine.com/livestreams.