The image below shows how the financial information regarding the parents is entered.
Information on Parent’s Adjusted Gross Income (AGI)- What to expect?
As you proceed further, the next question you will face, will be regarding the parent’s AGI. Now, before understanding the ways to answer this question, let us understand what is Adjusted Gross Income (AGI)? The AGI is the measurement of the total income in a financial year, without excluding the deductions, exemption, and tax credits.
The AGI includes anything that can be considered as an income, be it earned income like wages, salaries, bonuses and tips, or unearned incomes like interest and dividend income, capital gains, alimony received, business and rental property income, unemployment benefits, including the taxable portion of pensions, IRA distributions, and Social Security benefit payments.
**The paper FAFSA has a space to accommodate only 7-digit numbers, so if you are using the paper version of the FAFSA, and your parent’s AGI is more than $1 million, then you should enter $9,999,999 in the space of parent’s income.
Similarly, the online FAFSA form has a space to accommodate 8-digit numbers only, and if the parent’s AGI is more than $10 million, then you should enter $99,999,999 in the space of parent’s income.
For the parents who have not completed their federal income tax returns at the time of filing the FAFSA, the FOTW provides them with the Income Estimator, which helps them calculate the estimate of their income. The image below depicts how the income estimator looks, and the information one needs to input in order to find out the estimated income.
Questions Related to Income Earned from Work
The next question requires you to enlist the income of the custodial parents from sources like wages, salaries, tips, etc. One can find out the information related to the parent’s earning from work, on the parent’s W-2 and 1099 forms, or on IRS Forms 1040, 1040A or 1040EZ.
The FAFSA considers the following to find out the income earned from work:
- It adds lines 7 (wages, tips and other compensation), 12 (sole proprietorship business income and losses) and 18 (farm income) of IRS Form 1040 and box 14 (Code A) of IRS Schedule K-1 (Form 1065). If any of the above item is negative, then it should be treated as zer
- Line 7 of IRS Form 1040A
- Line 1 of IRS Form 1040EZ
If Any or Both the Parent/s is/are Dislocated Worker/s
Before understanding how to answer the question regarding the dislocated worker, let us first understand the actual definition of a dislocated worker.
According to the Workforce Investment Act of 1998 (29 USC 2801), a dislocated person is defined as a person who:
- Is eligible for receiving or already receives unemployment benefits because of losing a job, and has no chance of returning back to his/her old profession.
- Someone who is a displaced homemaker.
- Has been terminated or laid off from employment (or received a termination or layoff notice) because of a permanent closure of, or substantial layoff at, a plant, facility or enterprise.
- Is employed at a facility, and the facility is liable to get closed within next 180 days.
- Is self-employed, and has lost his employment due to natural disaster or economic crisis in his community.
- If a spouse of an active duty member of the U.S Armed Forces, is either a displaced homemaker or has lost his or her employment due to relocation.
If any or both the parent/s come under any of the aforementioned categories, only then they can qualify as a dislocated worker.
Other lessons on FAFSA