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All students (dependent and independent) must provide financial information in Step Two. The EFC calculation, determined by congressional formula, uses a family's income, household size, and certain expenses to determine if 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 a student's educational costs. Question 37 Filing Return - Indicate whether or not you have already filed, are going to file, or will not file a tax return for 1999. Question 38 Type of Return Filed - Indicate which tax form you filed or will file for 1999. Question 39 Eligible to File a 1040A or 1040EZ - If you (and your spouse) are eligible to file a 1040A or 1040EZ for 1999, you must indicate your eligibility to file one of these forms (even if you file a 1999 IRS Form 1040). For instance, tax preparers often file a Form 1040 or an electronic 1040 on behalf of a tax filer, even though that person's income and tax filing circumstances would allow him or her to file a 1040A or 1040EZ.
Question 40 Adjusted Gross Income - You must provide your (and your spouse's) adjusted gross income (AGI) for 1999, found on IRS 1040 - line 33; 1040A - line 18; 1040EZ - line 4; or Telefile - line I. If you do not have a 1999 tax form but will be filing one, you should use the AGI Worksheet to calculate your AGI. Note that AGI includes more than just wages earned; for example, alimony, Social Security, and business income are also included. Question 41 Income Tax - Enter the amount of 1999 income tax you (and your spouse) paid from IRS 1040 - line 49 plus line 51; 1040A - line 32; 1040 EZ - line 10; or Telefile - line K. Make sure this amount does not include any FICA, self-employment, or other taxes from Form 1040. Do not copy the amount of federal income tax withheld from a W-2 Form. If you did not pay any income tax in 1999, enter zero (0). Question 42 Exemptions - Enter the total amount of your (and your spouse's) exemptions. Exemptions are on IRS 1040-line 6d or 1040A-line 6d. If you answered "yes" on 1040EZ-line 5, use EZ worksheet Line F to determine the number of exemptions ($2750 equals one exemption). If you answered "no" on line 5, you should enter "01" if single or "02" if married. On the Telefile, use line J to determine the number of exemptions ($2750 equals one exemption). If currently divorced, separated, or widowed, but you have filed or will file a joint tax return for 1999, you should give only your portion of the exemptions. Question 43 Earned Income Credit - Earned Income Credits are available to low-income workers who maintain a home in the U.S. and meet other eligibility criteria defined by the IRS. Enter the Earned Income Credit (EIC) from IRS 1040 - line 59a; 1040A - line 37a; 1040EZ - line 8a; Telefile - Line L. If this question does not apply to you, enter zero (0). Question 44 Student's Income Earned - When the Department's processor calculates your EFC, certain allowances are deducted from your (and your spouse's) income for necessary expenses (like taxes and basic living costs). The amount you provide for income earned from work (including Federal Work-Study and other need-based employment earnings) is used to calculate these allowances according to a formula set by Congress. The income earned from work will also be used in the EFC calculation as an income factor when no AGI is reported. If you filed (or will file) a tax return, you should include the "wages, salaries, tips, etc." from IRS form 1040 - line 7; 1040A - line 7; 1040EZ - line 1; Telefile - use your W-2 Forms. Even if you filed a joint return, you must report your and your spouse's earnings separately. If you own a business or farm, you should also add in the figures from 1040 - lines 12 and 18. If you did not file a tax return, you should report your earnings from work in 1999. Add up the earnings from your W-2 Forms and any other earnings from work that are not included on the W-2 Forms. Question 45 Spouse's Income Earned - Use the instructions in the "Students Income Earned" section to answer this question. Question 46 Untaxed Income and Benefits (Worksheet A) - Enter the total from Worksheet A (found on page 8 of the paper FAFSA). Worksheet A collects information about certain untaxed income and benefits. Do not include on Worksheet A any income and benefits reported elsewhere on the application. Question 47 Exclusions from Taxed Income (Worksheet B) - Worksheet B on page 8 of the FAFSA will help you calculate exclusions from taxed income, such as work-study earnings. Because the items listed in this worksheet will be entered on the form and excluded from income when the Department's processor performs the EFC calculation, you should not subtract them from your responses to the income questions in Step Two. These amounts should be calculated on the basis of what was received between January 1, 1999 and December 31, 1999 and not what was received during the school year. Question 48 Total Current Cash, Savings and Checking Account Balance - Include the balance of checking or savings accounts as of the date the FAFSA is signed unless you do not have access to the money because the state declared a bank emergency due to the insolvency of a private deposit insurance fund. Question 49 Net Worth of Investments - Investments include real estate such as rental property, land, and second or summer homes. Do not include your primary place of residence (that is, your home). Include the value of portions of multifamily dwellings that are not your principal residence. Investments also include trust funds, money market funds, mutual funds, certificates of deposit, stocks, bonds, other securities, education IRAs, installment and land sale contracts (including mortgages held), commodities, precious and strategic metals, etc. Do not include the value of life insurance and retirement plans (pension funds, annuities, non-Education IRAs, Keogh plans, etc.) Investment Value - Investment Debt = Net Worth of Investments Question 50 Net Worth of Business - Business value includes the current market value of land, buildings, machinery, equipment, inventories, patents, copyrights, franchise rights, etc. You should not include your primary home, even if it is part of the business. Business Value - Business Debt = Net Worth of Business Question 51 Net Worth of Investment Farm - An investment farm is any farm that does not meet the definition of a family farm. A family farm is a farm that is your principal place of residence and one on which you materially participate in the farm's operation. Investment farms include the current market value of land, buildings, machinery, equipment, livestock, inventories, etc. To report current market value for a farm, you must use the amount for which the farm could sell as of the date of the application. Also, if you are not the sole owner of the farm, you should report only your share of its value and debt. As noted earlier, do not report a family farm as an asset. Investment Farm Value - Investment Farm Debt = Net Worth of Investment Farm Question 52 Number of Months Veterans Education Benefits Received - Enter the number of months from July 1, 2000 to June 30, 2001 you expect to receive veterans education benefits. If you do not receive veterans education benefits, leave this question blank. Question 53 Veterans Education Benefits - Veterans education benefits information is not used in the EFC calculation; your school will use it when putting together your aid package. If you receive veterans education benefits, you must report the amount of monthly benefits that you expect to receive during the school year (from July 1, 2000 through June 30, 2001). Such benefits include
Courtesy of: "Completing the 2000-2001 FAFSA," from the U.S. Department of Education | ||
In general, you (and your spouse) are eligible to file a 1040A
or 1040EZ if you make less than $50,000, do not itemize deductions, do not
receive income from your own business or farm, and do not receive alimony or
capital gains. You (and your spouse) are not eligible if you itemize deductions
or receive self-employment income, alimony, or capital gains.
