FAFSA's EFC is based on your gross before-tax income (including IRA and 401K contributions) and your excess assets. You are expected to save some of your after-tax income to pay for your child's education. During the year, you cut back and save as much as you can. However, when you fill out the FAFSA form, this after-marginal-tax bracket money is sitting in a non-retirement account and is used to increase your EFC. However, if you get a tax refund that comes in late, then it's not sitting in your account and you do not have to report it. Likewise, if you get a bonus (which is income) that comes in on July 1 and you use it to pay for college, it will not be sitting in your account when you fill out FAFSA following year.
One college accounts for this for student income because the percentages are high, but the comment was that this was "small" for parents. My son's college uses 8% after taxes and we're not talking about a meal at IHOP.
The no one right answer math question is: "What's up with that?"
Also, if you take IRA money out to pay for college, then that's added to your income and used in next year's EFC. Score one for Roth.
What's up with that number two?
In our case, our tax refund came in after FAFSA and before CSS Profile. I think I will take out a whole lot more in taxes and not file electronically.