My parents are separated but still file a joint tax return. Which parent’s information should I include on my FAFSA and why?
Which parent or parents are responsible for completing the FAFSA (Free Application for Federal Student Aid) depends on the parents’ marital status, living arrangements and financial support of the student as of the date the FAFSA is filed. Also, the parents must be legal parents (e.g., biological or adoptive parents or listed on the student’s birth certificate) or married to the student’s legal parent. Legal guardians and foster parents are not considered to be legal parents unless they have adopted the student.
Parents who are divorced or who have a legal separation as of the end of the tax year cannot file a joint federal income tax return according to IRS rules.
This suggests one of three possibilities:
If the parents live together, both parents’ information must be reported on the FAFSA, regardless of their marital status.
If the parents have an informal separation, they cannot live together.
Only one parent is responsible for completing the FAFSA when the parents are divorced or separated or never married and the parents do not live together. This parent, often called the custodial parent, is the parent with whom the student lived the most during the 12 months ending on the date the FAFSA is filed.
Sometimes counting the number of nights does not distinguish between the two parents. For example, the parents might share joint custody equally and there might be an even number of days, which can occur in a leap year or when the divorce or separation occurred less than a year ago. In such a situation, the custodial parent is based on whichever parent provided more financial support to the student in the 12 months ending on the date the FAFSA is filed. If that does not distinguish between the two parents, then it is based on whichever parent provided more financial support to the student during the most recent calendar year in which either parent provided financial support to the student. If that doesn’t distinguish between the two parents, then the college financial aid administrator gets to decide which parent is responsible for completing the FAFSA; in most cases, the financial aid administrator will choose the parent with the higher income.
(If the custodial parent has remarried, which can occur in the event of a divorce but not a separation, the stepparent’s information must also be reported on the FAFSA, regardless of any prenuptial agreements. This includes not just the stepparent’s income and assets, but also any children from previous marriages for whom the stepparent provides more than half support. The stepparent’s children do not need to live with the stepparent to be counted in the household size on the FAFSA. If these children are also enrolled in college, they may be counted in the number of children in college figure as well. The increase in income may reduce eligibility for need-based financial aid, while the increase in the number of children in college may increase eligibility for need-based financial aid.)
When the parents filed a joint federal income tax return and only one parent is responsible for completing the FAFSA, it will be necessary to separate the custodial parent’s information from the joint return. This can be done by adding income figures from the custodial parent’s individual W-2 and 1099 forms with half of any interest and dividend income from joint bank or brokerage accounts. Similarly, any income or losses from jointly owned businesses should be split evenly. To calculate the individual taxes paid, the custodial parent can either use the IRS Tax Tables or Tax Rate Schedules from the appropriate tax year or divide the actual tax liability in proportion to the custodial parent’s share of the joint adjusted gross income (AGI). The first of these two methods is the preferred method.
Note that the custodial parent will not be able to use the IRS Data Retrieval Tool in this situation. Accordingly, the student’s FAFSA is more likely to be selected for verification. The custodial parent should keep copies of his/her W-2 and 1099 forms, as they may be required as part of verification.
Copyright © 2019 by Edvisors.com. All rights reserved.