Instructions

Purpose: All students (dependent and independent) must provide their financial information for these questions. The EFC calculation, determined by a formula specified by law, uses a family's income, assets, household size and exemptions to determine whether the family has discretionary income. If the family has discretionary income, a portion and only a portion, of that income is included in the EFC as available for the student's educational costs.

How to complete the income tax section

It is best to use a completed 2008 income tax return to fill out this application. However, if you do not have a completed tax return, you should calculate your adjusted gross income (AGI) and taxes paid using the applicable IRS instructions. You can get the instructions and the appropriate tax form at a public library or download them in Portable Document Format (PDF) from www.irs.gov/formspubs/index.html.

When your application is compared with the tax return actually filed, the financial information must agree. If there are differences, you should correct the information using Corrections on the Web or by correcting your paper SAR and mailing it back to the FAFSA processor.

Even if you (and your spouse) are not required to file a 2008 income tax return, you will need to calculate your earnings for the year. Use W-2 forms and other records to answer the questions in this section.

If an answer is zero or a question does not apply to you, enter 0 (zero). Do not leave any of these questions blank.

For the 2009-10 FAFSA, you will use 2008 tax information to answer the income tax questions. The income tax questions give 2008 Internal Revenue Service (IRS) tax form line references.

If you are married at the time you submit the FAFSA, even if you were not married in 2008, both your and your spouse's income, assets and exemptions must be reported. If you and your spouse filed (or will file) separate tax returns for 2008, be sure to include the combined information from both returns on the FAFSA.

If you are single, divorced, separated or widowed, you must answer the questions for yourself only and ignore the references on the FAFSA to "spouse."

If you are divorced, separated or widowed but filed (or will file) a joint tax return for 2008, you must give only your portion of the exemptions, income and taxes paid for the income and asset questions.

Use the information from one of the following 2008 income tax forms to complete the FAFSA in the same manner as U.S. tax information: the income tax return required by Puerto Rico, Guam, American Samoa, the U.S. Virgin Islands, the Marshall Islands, the Federated States of Micronesia, or Palau. The amounts on these returns are already reported in U.S. dollars.

Foreign income

Income earned in a foreign country is treated the same as income earned in the U.S. Convert all figures to U.S. dollars, using the exchange rate in effect on the day you fill out the FAFSA. You can find information on current exchange rates at www.federalreserve.gov/releases/h10/update.

Include the value of any taxes paid to the foreign government in the "U.S. income tax paid" line item. If income earned in the foreign country was not taxed by the central government of that country and was not subject to the foreign income exclusion based on filing an IRS Form 2555 or 2555EZ, the income must be reported as untaxed income in Question 47(i)

In many cases, if you file a return with the IRS for a year in which foreign income was earned, a portion of the foreign income can be excluded on IRS Form 2555 for U.S. tax purposes. The figure reported on line 45 of Form 2555 (or line 18 of Form 2555EZ) should not be reported in Question 47(i).

Questions 33-35

33. Filing return. Indicate whether you have already completed, are going to complete, or will not file a tax return for 2008.

34. Type of return filed. Indicate which tax form you filed or will file for 2008.

35. Eligible to file a 1040A or 1040EZ. Indicate your eligibility to file one of these forms (even if you filed or will fill a 2008 IRS Form 1040). Answer "Yes" if you

• make less than $100,000,



• do not itemize deductions,



• do not receive income from your own business or farm, and



• do not receive alimony.

Also answer "Yes" if

• you filed a 1040 only to claim Hope or Lifetime Learning credits and you would have otherwise been eligible to file a 1040A or 1040EZ, or



• you filed a 1040 and were not required to file a tax return.

Answer "No" if you

• itemize deductions,



• are self-employed,



• receive alimony, or



• are required to file Schedule D for capital gains.