Simp. Needs Test

2010
05.14

The Simplified Needs Test is one of the tax loopholes an upper middle class (UMC) family can take advantage of.  When filing taxes UMC parents often file the standard long 1040 form.  Yet there are other options for families who fall in a unique tax bracket.  The exciting part is that certain UMC families qualify for this tax bracket.

Let’s start with the first qualification for the Simplified Needs Test (SNT).  Both parents must have a combined income below $50,000.  Now, I know what you’re thinking … we’re talking low income, right?  Keep reading though because you may fall into this category.

The adjusted gross income, meaning wages earned on the W-2 forms of the parents, must total below $50,000.  If this is the case, then parents should be able to file either of these short forms: the 1040A or 1040EZ.


Now, the important part of receiving the SNT benefit is to absolutely make certain to have your accountant use one of these forms.  If the accountant insists on using the standard long 1040 form, you will not qualify for the SNT. At the top of the form, double check to see the form has the title “1040A”  or “1040EZ” in bold letters.  If your accountant refuses to file a short form or simply does not know how, you must find another accountant who specializes in student college financial aid.

When you file a short form, your assets will be null and void in the eyes of the FAFSA.  That’s right.  Even if you have millions of dollars in assets (stocks, bonds, bank deposits, etc.) they will be exempt from the prying eyes of the deciders of the FAFSA.  That means a whole world of new possibility is open to you in the form of  government college grants and subsidized student loans.  We’re talking the Pell Grant, worth $5500 for the 2010-11 school year, college scholarship money from the school itself and the best government loans possible. A federal government student loan offers the best interest rates, some as low as five percent.

The SNT becomes significant because it lowers your Expected Family Contribution (EFC) on the FAFSA so much that the government and colleges will see your family in a whole new light.  For the UMC, it’s all about looking low income on paper — and keep in mind, this is a perfectly legal tax strategy that many people employ.

If the Simplified Needs Test is a tax loophole you can qualify for, find the right accountant, file with the correct form and reap the rewards of a great financial aid package.


$3.4 Billion in Free Scholarships.

© White Picket College, 2010 – College Funding for the Upper Middle Class

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