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How to Complete the FAFSA when a Parent Didn't File her Federal Income Tax Return

Mark Kantrowitz

November 08, 2010

I have a problem with my FAFSA. My mom didn’t file her income tax returns last year. What do I use when I fill out my FAFSA form? — Erica H.

There are four common scenarios in which someone might not file a federal income tax return:

1. Not required to file. The taxpayer is not required to file a federal income tax return because the taxpayer’s gross income is less than the filing thresholds listed in Table 1-1 of IRS Publication 17 and none of the situations in Table 1-3 apply.

2. Authorized extension of filing requirements. The taxpayer is required to file a federal income tax return but submitted IRS Form 4868 to get an automatic 6-month extension.

3. Authorized suspension of filing requirements. The taxpayer is required to file a federal income tax return, but the filing deadlines are temporarily suspended. For example, filing deadlines are suspended for active duty members of the Armed Forces serving in a combat zone for the duration of their service in a combat zone and for 180 days afterward.

4. Unauthorized failure to file. The taxpayer is required to file a federal income tax return and did not receive an extension or suspension of the filing requirements, but has not yet filed a federal income tax return. Sometimes this occurs because the taxpayer is disorganized, owes a big tax bill or is hospitalized, incarcerated or institutionalized. Sometimes the taxpayer is paid under the table and is afraid to report the income for fear of being fired. Some taxpayers will refuse to file a federal income tax return because they are tax protesters or tax evaders. None of these reasons for failing to file a federal income tax return are considered adequate by the IRS.

If the taxpayer was not required to file a federal income tax return, the Free Application for Federal Student Aid (FAFSA) is completed based on the taxpayer’s W-2 and 1099 statements and/or the last pay stub of the year. If the taxpayer is self-employed, a signed statement certifying the amount of adjusted gross income may be used. The questions concerning adjusted gross income, income tax and exemptions will be skipped. If the taxpayer’s earned income was above the minimum filing threshold, however, the FAFSA will be automatically selected for verification because of the apparent discrepancy. (Even if a taxpayer is not required to file a federal income tax return, it is often worthwhile to file a federal income tax return to claim a refund on federal income tax withholdings and to obtain various refundable tax credits.)

A similar approach is taken if the taxpayer was required to file a federal income tax return but obtained an authorized extension or suspension of the filing requirement. The applicant will be required to update the FAFSA when the extension ends, and this may change the applicant’s eligibility for need-based federal student aid.

Otherwise, if the taxpayer was required to file a federal income tax return but did not obtain an authorized extension or suspension, the applicant will be ineligible for federal student aid until the taxpayer files a non-frivolous federal income tax return. A failure to file a required federal income tax return without an authorized extension or suspension is considered “conflicting information.” Federal regulations prohibit college financial aid administrators from disbursing federal student aid or making professional judgment adjustments until all conflicting information is resolved.

If a taxpayer did not file because he or she was affected by a federally-declared major disaster, see Disaster Assistance and Emergency Relief for Individuals and Businesses on the IRS web site. It includes information about reconstructing records, extensions of time to file and tax law changes for disaster victims.

If a taxpayer did not have an authorized extension or suspension and did not file a federal income tax return despite being required to do so, she should seek the help of a qualified tax preparer or accountant. They will know how to address the problems with the taxpayer’s income tax situation. For example, the IRS offers payment plans for taxpayers who can’t pay their federal income tax bill immediately.


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