Question 85 - Worksheet B

The online application automatically presents Worksheet questions as appropriate. If you (as a parent) are completing a paper form, complete the right-hand column on page 5 labeled "Parents."

Payments to tax-deferred pension and savings plans. Your parents must report money paid into tax-sheltered or deferred annuities (whether paid directly or withheld from earnings), including—but not limited to—amounts reported on the W-2 Form, in Boxes 12a through 12d, codes D, E, F, G, H and S. They must include untaxed portions of their 401(k) and 403(b) plans. Note that employer contributions to tax- deferred pension and savings plans should not be reported on the FAFSA as an untaxed benefit.

IRA and other plans. Enter the amount of IRA deductions and payments to self-employed Simplified Employee Pension (SEP), Savings Incentive Match Plan for Employees (SIMPLE) and Keogh and other qualified plans. These plan payments can be found on IRS 1040—total of lines 28 + 32 or 1040A—line 17.

Child support received. Report child support your parents received for all children during 2007. Do not include foster care or adoption payments.

Tax-exempt interest income. Enter the total amount of tax-exempt interest income your parents earned in 2007, as reported on Form 1040—line 8b or 1040A—line 8b.

Foreign income exclusion. The IRS allows eligible U.S. citizens and residents living in foreign countries to exclude a limited amount of income earned abroad. Though deducted for tax purposes, this amount is considered untaxed income for federal student aid purposes. Provide the total amount of the foreign income exclusion your parents reported for 2007 from Form 2555—line 45 or Form 2555EZ—line 18.

Untaxed portions of IRA distributions. This amount can be calculated from IRS Form 1040 (line 15a minus 15b) or 1040A (line 11a minus 11b). If the result is a negative number, enter zero.

Untaxed portions of pensions. This amount can be calculated from IRS Form 1040 (line 16a minus 16b) or 1040A (line 12a minus 12b). If the result is a negative number, enter zero.

The only exception to reporting IRA or pension distributions as income is when these distributions are rolled over to another IRA or retirement plan within 60 days following the day on which your parents receive the distribution from the initial IRA or retirement plan.

Special fuels credit. Enter the total amount of credit for federal tax on special fuels your parents reported in 2007, from IRS Form 4136 - line 18 (nonfarmers only).

Housing, food and other living allowances. Housing, food and other living allowances provided to your parents must be reported. These allowances must be reported when they are part of a compensation package that some people, particularly clergy and military personnel, receive for their jobs. Include cash payments and cash value of benefits. If your parents received free room and board in 2007 for a job that was not awarded as student financial aid, they must report the value of the room and board as untaxed income. (This category, "housing allowances," excludes rent subsidies for low-income housing.)

Veterans' noneducation benefits. Enter the total amount of veterans' noneducation benefits your parents received in 2007. Include Disability, Death Pension, Dependency & Indemnity Compensation (DIC) and/or VA Educational Work-Study allowances.

Other untaxed income and benefits. Your parents should include untaxed income or benefits not reported elsewhere on Worksheets A and B, such as worker's compensation, untaxed portions of railroad retirement benefits, untaxed portions of capital gains, Black Lung Benefits, Refugee Assistance, disability, foreign income that wasn't taxed by any government, etc. For parents whose W-2 Forms show combat pay, any untaxed portion of that pay must be reported on Worksheet B and the full amount must be reported as income earned from work. Do not include benefits from flexible spending arrangements (e.g., cafeteria plans), student aid or Workforce Investment Act (WIA) educational benefits.

Money received. Your parents should not report anything for this question.

Certain income and benefits should not be reported on Worksheets A and B:

• Combat Pay for non-tax filers. Parents who did not file a tax return must report any combat pay received as income earned from work in Question 82 or 83. None of it should be reported on Worksheet B. This is because income earned from work is used in place of adjusted gross income (AGI) for non-tax filers, so putting combat pay on Worksheet B in this case would yield a double counting of funds.
• Food stamps and other programs. Benefits received from federal, state or local governments from the following programs are not counted as untaxed income: the Food Stamp Program; Special Supplemental Nutrition Program for Women, Infants and Children (WIC); Food Distribution Program; Commodity Supplemental Food Program; National School Lunch and School Breakfast Programs; Summer Food Service Program; and Special Milk Program for Children.
• Dependent Assistance. Your parents may be eligible to exclude a limited amount of benefits received for dependent care assistance if certain requirements are met. Generally, up to $5,000 of benefits may be excluded from an employee's gross income, or $2,500 for a married employee who files a separate return from his or her spouse. This exclusion cannot exceed the employee's (or his or her spouse's) earned income. (Note: Some states provide reimbursement for childcare expenses incurred by welfare recipients through Temporary Assistance for Needy Families [TANF]. Your parents must report this on the application because they bill the state for the amount of childcare costs incurred while on welfare and are reimbursed on that basis.)
• Per capita payments to Native Americans. Your parents should not report individual per capita payments received in 2007 from the Per Capita Act or the Distribution of Judgment Funds Act unless any individual payment exceeds $2,000. Thus, if an individual payment were $1,500, they would not report it on an application. However, if a payment were $2,500, they would report the amount that exceeds $2,000: $500.
• Heating/fuel assistance. Exclude from consideration as income or resources any payments or allowances received under the Low-Income Home Energy Assistance Program (LIHEAP). (Note: Payments under the LIHEAP are made through state programs that may have different names.)