<p>this is our first time completing a FAFSA and i need a very clear answer on what to put for our adjusted gross income vs. parents earned income from working. we don't have time to have our taxes done yet by our accountant so i'm working from our final pay stubs for 2006. we do have untaxed earnings for 401k deductions. i have the "paying for college w/o going broke" book but am still not clear. also, for the question regarding parent's highest level of education: if neither parent attended college but completed a business school or trade school program, should we check our highest level of education as high school or "other". this also isn't clear in the book. lastly, in reporting income tax paid, am i only reporting federal income tax or do i add in state and local taxes as well?</p>
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<li><p>The "earned income" question is asked so the formula can calculate how much your parents paid in social security tax. That amount (the calculated tax) is then deducted from the income available to be assessed. Work off the previous years tax returns, especially if there have been no major changes. W2 income or Schedule C net profit is income from work. Some 1099 misc income (independent contractor and the like) is income from work. Interest income, social security payments, and the like aren't income from work. The number won't be the same as AGI. The higher the "income from work" number, the better. The lower the AGI, the better. Remember, you'll be correcting these numbers later after the taxes are done. No biggie.</p></li>
<li><p>Highest level completed, so indicate high school unless college was completed. Probably won't matter, but some schools may consider whether an aid applicant is the first in the family to attend college.</p></li>
<li><p>Income tax paid-- the question actually asks for "US income tax paid" - which means Federal tax. Use last years return as a guide. Don't confuse income tax withheld with tax paid. Higher is better here, from a financial aid perspective.</p></li>
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<p>thanks for replying. for tax question, though, looks like my accountant used fed tax withheld on last years 1040 as total tax payments so i guess i have to use that same Fed withholding number from our pay statements that we are working from now which does not include any fed soc. sec. tax paid/withheld. and when looking at last year's return, it appears the only dif between our earned income and adj. gross income is $2k. this is income from my husband's S corporation (side business) which leads to another question. i'm sure our accountant will add this in again this year for our adj gross income (and again it will only be about $2k) yet according to the higher education recon act, it states that the net worth of a small business shouldn't be reported if it employs less than 100 employees. so what happens if i don't include the $2k on the FAFSA and it ends up not matching the adj. gross income on my tax return that the accountant completes?</p>
<p>Ther is a big difference between the net worth of the business and the income from it. One is an asset and the other is - well - income. If there is personal income from the business it will have to be shown. The FAFSA is a federal form and any differences between it and taxes filed will show up.</p>
<p>so just to be clear, if i'm looking at just my end of year pay stub, i should use gross pay (before any taxes or payments to my 401k) for the question regarding earnings from workings. then for the question regarding adj. gross income, i should use our earnings without all Fed taxes paid (or just the Fed withholding shown on my paystub) and do i also sutract before-tax deductions? then i have to add in the $2k income from my husbands business. do i have that right?? sorry if i sound stupid, but i'm mostly just trying to make absolutely sure i fill this out correctly as i'd like to submit it as soon as possible. thanks!!!</p>
<p>Yeah-- sounds like your "income from work" will be your gross pay + whatever hubby earned from work (his income from the S corp should be included as earned income). Because that's what you've paid (or will pay) SS taxes on. </p>
<p>AGI will be your Gross Income, less adjustments to income (health savings account deduction, moving expenses, 1/2 self employment tax, SEP IRA's, IRA's, self employed health insurance premiums, penalties for early withdrawal of savings, alimony paid, student loan interest deductions, and a few other things-- they're all listed on the 1040 return under Adjustments to Income).</p>
<p>Let me try. </p>
<p>Your income from working will be the gross pay on your stubs plus hubby's side earnings. Normally you would add on the 401k contribution, but you say it is included in the gross pay number already.</p>
<p>AGI will be gross pay plus hubby's side income again, but this time subtract only those things that are on that side of the 1040, assuming you have some. See <a href="http://www.irs.gov/pub/irs-pdf/f1040.pdf%5B/url%5D">http://www.irs.gov/pub/irs-pdf/f1040.pdf</a></p>
<p>You might want to calculate the tax that will be due, for that line of the FAFSA. It is slightly different this year than in 2005. Or just use last year's number and plan on amending the FAFSA later.</p>
<p>(cross posted w/ SB7, same info)</p>
<p>thank you both. so itemized deductions from the tax return and your taxable income reported on the 1040 never come into play on the FAFSA?</p>
<p>Affirmative.</p>
<p>Right, not directly, anyway. Indirectly, they determine how much federal income tax you pay, which IS considered (and deducted from available income).</p>
<p>all i know is that my EFC is calculating out to be about $17k and that is just crazy to me. i don't have that kind of extra money.</p>