For a student who will be a senior this year and college next year..when do you fill this out?
I have a child who's going to graduate June 2012 /enter college August 2012. We'll fill out her FAFSA in January 2012 (and then again January 2013, 2014, 2015).
You must do your 2011 taxes first (you don't have to have to send them in yet, but you must have all the figures). You probably won't have your W2 'til January 31st . . . though you can find the same numbers on your final paystub, bank accounts, etc. from December 2011.
As others have said, it's important to do your FAFSA quickly, though anytime in January is acceptable. This was always a huge problem for me in college; I was qualified for so much financial aid . . . but my parents REFUSED to do their taxes 'til April 14th, and some of the "pots of money" ran out before I could get my forms in. They REFUSED to understand that this was a major problem for me.
Incidentally, our high school and our credit union both host FAFSA workshops for people doing these forms for the first time. Additionally, you can find books about how to maximize your financial aid. The forms themselves aren't any more difficult than tax forms, but we've learned some things that'll help us specifically. We won't qualify for Pell Grants, but the FAFSA does open us to some school-based financial aid.
We'll be doing this for the next 7 years, so my husband and I have agreed upon a labor split: He's always done our taxes, so he's in charge of doing that ASAP in January, then he's responsible for our girls' FAFSAs. I'm responsible for helping them with scholarship applications.