How do I deal with FAFSA when I've been paid under the table for years?
October 27, 2010 12:38 PM   Subscribe

I'm applying to grad school. How do I deal with FAFSA when I've been paid under the table for years?

Inspired by loquacious' question: I lost my job in 2008 and have been working odd jobs ever since. I've tended bar off the books, mowed lawns, babysat, gardened, house sat, walked dogs, anything that got me enough cash to make rent. I know, I know, it's terrible and irresponsible, but I panicked after I lost my job, took on a few odd jobs to make ends meet, and pretty soon I settled into the habit. I'm scared to death the IRS will find out, as I have very little money in my bank account right now to pay all the taxes I owe. I feel so ashamed of myself.

I'm planning on applying to an affordable grad program next year so I can get my career back on track, but I have no idea how to handle the FAFSA form. Am I screwed?

Sorry if I sound anxious, but I've been pushing this worry out of my forefront thoughts and left it to metastasize in some dark corner of my brain. What do I do first? The application is due this February and I'm in NYC.
posted by anonymous to Work & Money (9 answers total)
You should file an honest tax return (including back years), see what you owe the IRS, and then setup a payment plan with them. You may even be able to use some of your student loan money to help yourself pay.
posted by rbs at 12:51 PM on October 27, 2010

If you were merely making ends meet, you may have had so little income that you either owed no taxes at all or perhaps even qualified for a tax credit. Before you panic, do the math. Figure out what you would have owed had you filed an honest return, because it might be zero or a very small amount.
posted by prefpara at 2:18 PM on October 27, 2010

Unfortunately, if you're filing as an independent student, you'll need to include tax figures in your fafsa. That's really the only way the FAFSA can calculate your efc reliably. During your initial application, you can just use tax estimates, but when it comes down to it the school is going to demand your 1040 (or whatever form you're going to file).
posted by Think_Long at 2:22 PM on October 27, 2010

You don't need to have filed a tax return to fill out the FAFSA, but it does ask for your income. Like prefpara says, the first step is figuring out what that is. If you were juuuuust making ends meet, it's possible that you fell below the minimum income to file (~10K a year, I think), in which case you don't need to take things up with the IRS, though you should start filing again once you start school.
posted by kagredon at 2:39 PM on October 27, 2010

I do think you have to claim some income to fill out the FAFSA or at least have a tax return. But I wouldn't panic; as rbs , call the IRS and at least claim some of your taxes. You won't be screwed. I don't think they are sitting around waiting for you to pay what you made on a few odd job- but this will get you set up to complete the FAFSA.
posted by Rocket26 at 3:05 PM on October 27, 2010

but when it comes down to it the school is going to demand your 1040 (or whatever form you're going to file).

That was not my experience in graduate school or undergrad. They never once asked for any kind of proof or even demanded I file a tax return, and I relied on FAFSA every single year.
posted by toomuchpete at 3:16 PM on October 27, 2010

I'm a financial aid adminstrator at a community college. I can give you some general info, but there may be particulars for your school that I won't know about.

Are you applying for the 10/11 academic year? Then you need to figure out your income for 2009.

Are you single? If so, and you can call yourself the head of your household, and you are under the age of 65, you are not required to file taxes if your income was less than $9350 for the year. If it was more than that, you're going to have to file a tax return for 2009. Here is a link to the IRS website with the gritty details of who has to file.

If you do not have to file taxes, then you indicate on your FAFSA that you will not file, and any income you earned in 2009 can be listed under your wages.

If you enter zeros for your income you could be selected by the Department of Education for verification. You may be selected anyway (about 30% of students who fill out the FAFSA are selected for verification). If that happens, you will need to provide your financial aid office with documentation that justifies the income you listed on your FAFSA. Your financial aid office will contact you if you are selected for verification.

Feel free to MeMail me if you have other questions!
posted by omphale27 at 3:55 PM on October 27, 2010

People pay taxes to fund certain things, including education. Your employer did not withhold taxes for you, you did not declare the income on tax returns, yet now you expect that those who had been paying taxes should kick in and pay for your education?

As someone who pays taxes and paid for the majority of his education out of his own pocket (until I had a job that would reimburse me for my tuition), I recommend that you seek to amend your tax returns for the prior years and tell the government your true income, then pay the taxes on it, then look for some money back from the government in the form of financial aid.
posted by Brian Puccio at 6:02 PM on October 27, 2010

even if you owe no income tax you will owe FISA i.e. Social Security taxes on that income since it's "self-employment"... i think it comes out to almost 15% but I'm not sure... (in the same boat)
posted by at 6:16 PM on October 27, 2010

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