But beware if you turn to an expert with your Free Application for Federal Student Aid, the form required to apply for college financial aid, which many parents are now rushing to complete.
The typical tax professional who helps with your tax return may not be equipped to maximize your financial aid. In fact, your tax preparer may inadvertently undermine your chances of getting aid.
This seems improbable to many people because tax preparers try to show Uncle Sam that you have a low income so you can get a refund. Seemingly, that would be the same strategy for winning financial aid for college. After all, aid is based on income, and so having a lower income should increase the chances of getting aid.
2 forms, not the same
However, the complex formula built into the questions you answer on your FAFSA calculates your income and family expenses differently than the formula built into your tax return. People who think tax returns and FAFSAs operate the same can end up shooting themselves in the foot when it comes to aid for college.
For example, financial aid consultant Kalman Chany points out that if your tax preparer gets you a refund, you will have to report it on next year's tax form as part of your adjusted gross income.
"If you collect an average state and local refund of $1,600 each year over the four college years, you may have cost yourself as much as $3,000 in grant money," Chany says in his book, Paying for College Without Going Broke.
Look for the right pro
Also, certain strategies for cutting income on tax forms fail to reflect expenses you have incurred, such as Social Security and Medicare. While that's fine for taxes, on your FAFSA form, this might leave you looking like you are in better shape financially than you are. Converting an IRA into a Roth IRA also might make sense for taxes, but could hurt you when applying for financial aid. In addition, putting money into 401(k)s and IRAs can help boost a tax refund, but won't help you with financial aid.
Meanwhile, if you are getting help on your taxes and you also are applying for financial aid this year, choose a tax professional who also understands the quirky formula for financial aid. Certified public accounts, or CPAs, who also use the CCPS designation are certified college planning specialists aware of the FAFSA formula.
Check in your community for free clinics on preparing your FAFSA. But keep in mind that you can become more skilled than many tax professionals with the FAFSA if you read Paying for College Without Going Broke.
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