When filing a joint return on your FAFSA, there is a doubt about calculating your or your parents’ income. For this reason, today, we will talk about how to calculate individual income on a joint return so that you can clear up all your doubts in a really simple and quick way.
It should note that filing the FAFSA is the only way to be considered for subsidized and unsubsidized Stafford loans. It also applies to state scholarships and work-study, and regardless of whether you are sure if you will apply for these programs, you should make sure to complete the application.
Benefits of completing the FASFA and what your application entails
The Free Application for Federal Student Aid, known simply as FAFSA, is a form that undergraduate and graduate students must complete to receive federal education aid. This application must report household income, including the student’s and parents’ income.
This application involves referencing tax information such as W2s and tax returns and requesting other general information about the student. This process is essential to receive college funding and is required for all students at state-affiliated, public and private colleges and universities, and can be completed by any student.
Failure to complete a FAFSA each year can miss opportunities to fund your education. It is important to finish each part very carefully, avoiding possible errors.
If you have no errors, your application will be processed much faster, but you can go back and adjust your answers if you make a mistake.
What does it mean to file a joint return?
It is important to note that different situations, such as marital status or age, can be described in the FAFSA. If you are a college student with separated parents, their income will be included in the application, even if they are divorced.
Joint filing will mean reporting the parents’ income on a joint tax form. In many cases, the 1040 tax form combines the income of both parents and reports the adjusted gross income as a single amount.
Recently the FAFSA incorporated a new IRS data retrieval tool, which allows the process to be expedited. It results in little or no errors, and all applicants can choose whether or not to report data this way.
Thanks to this tool, students will be able to save a lot of time because they will not have to calculate their parents’ income or other information from their tax documents. If you are under 24 years of age, if you are married or belong to any category, you are considered independent. In these cases, you will only report your income or your and your spouses’ income without including your parents information.
How to estimate individual income on a joint return?
If you are looking to calculate estimated income on a joint return for separate filing, there are a few ways to do it.
On the one hand, you can find your or your spouse’s or parents’ income by referring to the employers’ W2s. Each person employed and on the payroll of a business will have an individual W2 to report the precise income earned from that job.
It will also be possible to find the annual earnings through the tax return for the year. It will be one of the first lines on the return under wages, salaries and tips. You can also review any other form where annual earnings are listed.
What happens if you have several W2s?
If a person has several W2s, it is because they are employed in several places. In this case, you must add the amount under the wages, salaries, and tips line on the form to obtain the gross income.
It will also be basic to include any information regarding farms, family businesses, or any major source of income. Although there is a specific section on the FAFSA for this income, you should be aware that it is taken as gross income.
If W2 or similar forms are being used to find income, you must include that information. If the parents do not file their taxes, the income should be on lines one and eight of their W2s.
By having this information clear, itemizing individual income will be much easier. However, if you are still having difficulties, the IRS data retrieval tool can become a great solution to help solve this error. It will make the procedure much simpler and less complicated.
It is a tool that directly accesses the IRS certified database, eliminating any margin of error. It will be the most effective way for you to be able to have the information from the FAFSA and thus avoid any problems.
Now that you know all about calculating taxes and filing the FAFSA, you can take control of your education funding.
For years I have studied American finance regulations. All the information in this blog is sourced from official or contrasted sources from reliable sites.
Salesforce Certified SALES & SERVICE Cloud Consultant in February 2020, Salesforce Certified Administrator (ADM-201), and Master degree in “Business Analytics & Big Data Strategy” with more than 13 years of experience in IT consulting.