If you receive a 1099 for non-employee compensation, it means you do own a business. The business might be a consulting business or a speaking business, but still a business. You might not have any assets or a storefront, but it is still a business. This is very common in the “gig” economy where many folks are independent contractors- which equates to owing a business.
@BelknapPoint you asked what the current CSS Profile form looks like. Here is the relevant question:
Select the statements below that apply to the student’s parents
[] Own or operate a business that is a primary income source
[] Own or operate a business in addition to other work
So having said that, I know my wife owns a business from the IRS definition. BUT do College FAOs use the same definition?
My wife doesn’t own a business in the ordinary sense of the word… no employees, no bank accounts, no office, bookkeeping, or even a dedicated computer. In our case she gets a few 1099s and we use the Schedule C to deduct unreimbursed travel related expenses. I assumed colleges were mainly concerned about people hiding assets in business, but since her business has no assets, I was wondering if it was worth filling out the extra stuff since all the relevant info is reported on Line 12 of the 1040.
I hope that explains why I thought the question was not that clear. Not everyone uses the IRS definition of a business to define a business.
@muchtoomuch Yes, college FAOs consider that a business. Expenses deducted from business income are exactly the sort of thing they want to know about.
What if it is income from past work? Actors get residuals from movies and tv shows they completed years ago. They might get a check for $6 or $600, but have no expenses, nothing to write off. It is just income and included on the taxes.
I don’t think this kind of income makes the parent a business owner. I have friends who get paid royalties for books they wrote years ago. Again, no expenses, just a check.
@twoinanddone if your friends use schedule c to report that royalty income then yes, financial aid offices will treat that as a business.
In this particular case, by denying business ownership the OP would be hiding business expenses that the FA office might treat as income.
You can own a business without having any expenses. So the FA simply will not have any tax-deductible expenses to add back in to AGI. That’s good.
My opinion…it’s this one.