Should be easy, BUT my wife is professor. She gets a her salary from the University, but she also gets significant revenue from speaking engagements. This could be from $4000 or up to $25,000 in a good year.
While we fill out a Schedule C each year, we treat her speaking engagements as an unnamed sole proprietorship. (she has no company name).
So on the CSS do we say we own business?
Does the business have assets and liabilities? For example a separate bank account that you didn’t include as personal assets? If so then you should list those as business assets (which would be treated more advantageously than personal assets, at least for the FAFSA). If it’s just income paid to your personal bank account then it’s already been included.
If you complete a schedule C…isn’t that for self employed income? It doesn’t matter if the business has a name, I believe.
I think you do own a business.
I think Twoin18 has the right idea.
Thanks again. Yes while, technically for IRS purposes, my wife is the sole proprietor of a “Speaking” business, she has no assets related to that business, all income goes straight into our personal savings account and it is accounted for on the CSS in our AGI reporting.
I have a blog that earns a small income from ads and affiliate links, and I said I owned a business, but then put the value as $0, since there’s really nothing I could sell or borrow against.
Yes, you own a business. We have a similar situation (1099 income from a non-profit), and explained it in the additional information section. You may have to send your complete tax return to the school(s), so they will see what is included on your schedule C.
^ This. If you file a schedule C, you own a business. Schools will probably want to see your tax return in order to check business expenses, if any, that should be added back to AGI.
My husband and I have had a relatively small amount of income this way, receiving 1099s and reporting on Schedule C. Sometimes those payments were just covering travel expenses, so when all was said and done, we had no taxable income as we deducted the expenses. I gather those would get added back in, in the case of financial aid? That would be a bummer. (We never applied for financial aid so it wasn’t relevant).
Maybe, it you have a really expansive definition of “own a business.” I know someone who has a regular W-2 job. Based on her expertise, on the side she also gives lectures three times a year at a medical school, earning several hundred dollars each time. The medical school gives her a 1099 every year. There are zero expenses; the only thing reported on the schedule C is the income from the lectures. There is no separate business entity or assets. For financial aid purposes, I have a really hard time believing that giving these three lectures a year constitutes a “business.”
^ schedule c is for reporting profit or loss from a business. The IRS has pretty clear guidelines about what constitutes a business. Most FA offices will want business details from anyone filing a schedule c, 1120s, etc. In your friend’s case, it’d be pretty simple to fill out the business supplement and provide the schedule c. For those listing expenses on the schedule c, some might get added back in. For those with no expenses, nothing would change. But filing a schedule c and then claiming not to own or operate a business would be hard to defend. Separate entity or assets aren’t relevant.
Belknap, there are tens of thousands of people who moonlight like your friend. Owning a business does not require owning a factory or capital equipment… if you’re getting a 1099 every year, sounds to me like a business. And why isn’t your friend expensing travel costs, mileage, etc?
It’s probably reimbursed. You don’t get to expense it if the client is paying for it.
I’m not approaching this from an IRS perspective; I’m looking at it as someone applying for need-based financial aid. In the case I have personal knowledge of, the schedule C is filed because that’s a requisite precursor to filing schedule SE so that the self-employment tax can be calculated and collected. In other words, the primary reason for completing a schedule C is not because there is a bona fide business; it’s because the self-employment tax must be collected, and completing schedule C is the first step in doing that.
It might be a business, or it could mean there’s an employee who is not getting paid W-2 wages.
Because there’s nothing to expense.
The parent in question already has W-2 wages- she’s a professor. And then she earns as much as 25K per year on top in income which gets reported on a 1099. This doesn’t seem complicated to me- she earns W2 wages and owns a business. The college really doesn’t care if it’s a “bona fide” business or not. The college wants to capture an accurate picture of the parent’s financial status and earnings.
If an activity doesn’t rise to the level of a “trade or business” for income tax purposes, there’s no SE tax. The only reason an activity is subject to SE tax is that it rises to the level of a trade or business.
If you’re an employee whose employer is doing it wrong, Schedule C is not the appropriate income tax treatment.
Schedule C is an expedient method of handling edge cases, but the downside of that expediency is that you’re declaring, under penalty of perjury, that you have a business.
I agree. Whether income is derived from a “business” or not, if no expenses are being claimed and all income makes it into the AGI, what difference does it make? There’s nothing extra to report on FAFSA, and for Profile schools, the business supplement wouldn’t change anything.
@BelknapPoint Whether or not the business info makes a difference is up to the FA office but I don’t see a way around answering yes to this question for schedule c filers. It’s a straightforward question.
What specific question are you saying is straightforward? The most recent version of Profile I have access to is from several years ago. That version instructs the student to “Enter your parents’ net income (or loss) from business, farm, rents, royalties, partnerships, estates, trusts, etc. as reported on their… IRS form 1040, lines 12, 17, and 18.” Any income (or loss) from a schedule C or C-EZ would be found on line 12 of form 1040. OP would provide a figure for this Profile question, as would the person I know who completes a schedule C (actually a C-EZ) for the six hours of medical school lectures she is paid for each tax year.
Yes, complying with this question is straightforward. If there’s an entry on form 1040 line 12, 17, or 18, it gets reported here. But that doesn’t mean that income reported from line 12 is coming from what could reasonably be considered a going business.
OP asks “So on the CSS do we say we own business?” Is Profile now asking this? Or is OP simply referring to the Profile question that I quote above? If it’s the latter, than OP needs to know: if your form 1040 has an amount on line 12, report it on Profile as instructed. An answer here doesn’t mean, in my opinion, that your wife actually “owns a business.”
The question I think is straightforward is the one quoted in the OP’s initial post.