Can a Dependent Student File the FAFSA as Independent if the Student's Parents Don't File Federal Income Tax Returns?

Can a Dependent Student File the FAFSA as Independent if the Student's Parents Don't File Federal Income Tax Returns?

I’m 22 years old, and I don’t receive any financial aid. I’ve tried

to fill out the FAFSA but I have an obstacle. I claim myself and no

one else on my taxes. No one claims me. My mom does not fill out a tax

return because she doesn’t get a W-2. (She works as a bartender at a

very small bar and is paid in cash only.) I still live at home with

her, but other than that I don’t get any financial help from her. Am I

able to fill out a FAFSA without providing any of her information, or

do I have to wait until I’m 24?

— Angela T.

If a student is considered to be a dependent student, the student’s

parents must complete the FAFSA. The parents must also supply copies

of their federal income tax returns if requested by the college

financial aid administrator.

If the student is considered to be an independent student, parental

information is not required on the FAFSA.

In most cases a student who is under age 24 as of December 31 of the

academic year is considered to be a dependent student, regardless of

whether the student is claimed as an exemption on the parent’s federal

income tax return and regardless of whether the student is financially

self-sufficient. The main exceptions are when the student is married,

a graduate student, a veteran or active duty member of the US Armed

Forces or an orphan, or when the student has a dependent other than a

spouse.

When there are unusual circumstances, a student can appeal to the

college financial aid administrator for a dependency override. Unusual

circumstances do not, however, include any of the following

circumstances, alone or in combination: the student is financially

self-sufficient; the student’s parents do not claim the student as an

exemption on their federal income tax returns; the parents refuse to

complete the FAFSA; the parents refuse to supply federal income tax

returns or other documentation during verification; or the parents

refuse to contribute to the student’s education.

College financial aid administrators grant dependency overrides in

rare circumstances. The student might receive a dependency override if

both parents are incarcerated or institutionalized. College financial

aid administrators might grant a dependency override if there is an

abusive family environment, such as when there are court protection

from abuse orders against the parents. Living at home with one’s

parents, however, is inconsistent with most of the circumstances that

typically justify a dependency override.

College financial aid administrators generally do not grant dependency

overrides for a failure to file required federal income tax

returns. Subregulatory guidance from the US Department of Education

requires college financial aid administrators to know “(1) whether a

person was required to file a tax return, (2) what the correct filing

status for a person should be, and (3) that an individual cannot be

claimed as an exemption by more than one person.” Discrepancies

involving these aspects of federal income tax returns are considered

to be “conflicting information” and college financial aid

administrators may not disburse federal student aid until the

conflicting information is resolved. Colleges must also resolve all

conflicting information before making any adjustments to the data

elements on a student’s FAFSA, including a dependency override.

Accordingly, a failure to file a federal income tax return when

required would not be considered an unusual circumstance that

justifies a dependency override.

Thus college financial aid administrators may not disburse federal

student aid when the student, the student’s spouse or a dependent

student’s parents fail to file federal income tax returns and were

required to do so. Taxpayers are required to file federal income tax

returns when his or her annual gross income exceeds certain filing

thresholds. These filing thresholds may be found in

IRS Publication 17

and are equal to the sum of the exemption amount and the standard

deduction. But if someone’s income falls below these thresholds, the

college’s financial aid administrator will wonder how they were able to

support themselves. Such a FAFSA is likely to be flagged for

verification.

Generally, employers who pay an employee $600 or more per year must

provide the employee with an IRS Form W-2 regardless of whether the

employee is paid by check or in cash. Likewise, if the employer pays

$600 or more a year to a non-employee contractor, the employer must

provide the contractor with an IRS Form 1099. Failure to provide

employees with W-2 or 1099 forms may be a sign that the employer is

engaged in tax evasion.

An employee must still file a federal income tax return even if his or

her employer did not provide a W-2 or 1099 statement as required by

the IRS. Even if the employee’s gross income falls below the filing

thresholds, the employee may still be required to file a federal

income tax return to pay Social Security or Medicare taxes. The

employee will have to attach

IRS Form 4852: Substitute for Form W-2 or Form 1099-R

to their federal income tax return. Otherwise the employee is also

engaged in tax evasion. It is best to seek the advice of a

qualified accountant in such a situation.

Clearly, if an employer is engaged in tax evasion, the employee may

lose his or her job by reporting the employer to the IRS. This puts

the employee in a difficult situation. But no tax return means no

federal student aid.

Source: Fastweb

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