Can a Dependent Student File the FAFSA as Independent if the Student's Parents Don't File Federal Income Tax Returns?
By The Fastweb Team
August 31, 2017
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.
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