See what we mean? When it comes to scholarship money, as far as the IRS is concerned, it's pretty much free money that you don't have to pay back, or pay taxes on. As long as you are enrolled in a program leading to a degree, the money is used for tuition and/or school-related expenses, and the funding is not a payment for on-campus work, the college cash is all yours!

The situation is a bit different for another form of financial aid, however, called Federal Work Study. If you're eligible, it means you'll be working on campus to earn money toward school expenses. Because it's earned income, however, it must be claimed as such when you file taxes.

As for loans, they won't affect your taxes until you start paying them back. When the time comes, you'll be happy to know that Uncle Sam allows up to a $2,500 tax credit for paid loan interest (at least you'll get some money back!).

So now you've filed your taxes, and are about to bubble (or click) the income information into the FAFSA, and the confusion starts again. Do you have to enter your tax information, even if your parents still claim you as a dependent? What if your parents are separated -- do you need to get the tax returns of your non-custodial parent? Basically, the rule is simple: If you file taxes, you must provide that information in the section of the FAFSA that asks about your income. In addition, you'll need to answer all of the questions in the section about your parents' income, unless you can claim that you're "independent" (see if you're eligible at FinAid.org.

If you have divorced parents, you're only required to report the income of the parent with whom you live. However, you will have to provide information for any child support your other parent contributes.

There you have it! Taming tax turmoil isn't really all that bad (especially if your family files taxes through an accountant!).