<p>I have a question about the CSS profile -- I own a small business. In looking at the profile questions: BA-126A BA-127A it asks for gross receipts and total expenses. Is it me or would this create a false impression of the amount of money a small business makes. If for example -- the business grossed $500,000 and its total expenses were $100,000 as defined on the section of the tax return that question is supposed to answer then it would look like there was a $400,000 profit. I dont see anywhere that the cost of goods sold gets calculated. In my example, if the cost of goods sold was $350,000 then the real profit would be $50,000 -- am I missing something ??</p>
<p>CSS wants to know that info because schools are going to “add back in” some of your deductions. The amount that YOU think is your income isn’t likely going to be what schools think it is.</p>
<p>For example, if you deduct your phone, schools may add that back in. If you depreciate, some schools may add that back in. If you deduct meal expenses, some may add that back in. I think some even add back in the “employer” portion of FICA.</p>
<p>Unfortunately, CSS Profile schools are rough on the self-employed. That’s why the NPCs don’t work for y’all.</p>
<p>Mom2collegekids, that’s true, but not responsive to OP’s dilemmma, which is how to account for the fact that the business has to pay for its inventory (a sum that would never be added back in) when the form asks for gross rather than net receipts.</p>
<p>OP, Are there definitions of “expenses” and “gross receipts” in the Profile instructions? (I think you have to assume IRS definitions aren’t being used here.) For this to make sense, “expenses” would have to include cost of goods sold. Or “gross receipts” would have to exclude cost of goods sold (which would be a really odd approach). You may have to make a call to clarify this.</p>
<p>For my example, this is what the definitions say relative to an LLC which files form 1065</p>
<p>BA-126A - Enter the total gross receipts this business had in 2013. This amount can be found on:</p>
<p>IRS 1065 line 1a (multiply by your percentage of ownership);</p>
<p>BA-127A - Enter the total expenses this business had in 2013. This amount can be found on IRS 1065, line 21; enter only your parents’ share of the total expenses.</p>
<p>Using those lines from the tax return they are asking for gross receipts less total expenses – they are not seeking the information which would be contained on line 2 which is “cost of goods sold” or even line 3 which is gross profit which subtracts the cost of goods sold from the gross receipts. The business expenses are salaries, advertising, rent and the like. </p>
<p>In my example the $350K would be the cost to acquire the goods that are then sold (hopefully) at a profit. </p>
<p>The largest expense my business has are the cost of goods sold as we work on small margins. This profile section seems to make it look like there are hundreds of thousands of extra dollars there – I only wish !!!</p>
<p>I did call CSS and got someone who simply said that the amount to put on line BA-127A is from line 21 on IRS form 1065.</p>
<p>If this was a service business then there would be little to no cost of goods sold – I distribute products so I have to buy them and resell them so the cost of goods sold is my single largest expense. Again – am I crazy or does this seem to unfairly characterize the income of others in a similar situation ?</p>
<p>I have no experience with profile or owning a business but did a little googling. I think answering those questions on the basic profile will trigger having to fill out the CSS profile business/farm supplement. It appears the supplement is available at the colleges’ finaid websites.</p>
<p>Thanks AD – I see that as one of the required docs on the Harvard aid site but don’t see anything that triggers the use of that supplement – I looked at all of the schools document requirements we are applying to and only 2 of them that require the CSS profile also require the Business Supplement – I am going to email the aid offices to make certain this is not required as it is not listed as something they want to see.</p>
<p>I just picked Harvard at random. This link just says any self-employed or business owner parent will need the supplement. Your answers on the profile let them know that you should be sending the supplement too as well as all the other doc a school requires. It could be that some schools have their own business form even though they use the profile. It’s a good idea to contact the schools if you don’t find the info on the website. It doesn’t make sense that there won’t be some kind of followup to the profile that allows you to include the cost of goods.</p>
<p>Not all colleges that ask for the CSS Profile ask for the business/farm supplement. Schools like U of Chicago do not ask for it (I think only one of D2’s schools required it last year and that was Swarthmore). I happen to have a service business, so that was okay with me, but I see the OP’s dilemma. </p>
<p>One think I try to keep in mind is that the FA people are NOT all accountants, and they don’t own businesses and understand some of this information. If you think the forms don’t accurately represent your situation, write a separate letter to the Financial Aid office laying out this type of information to them and indicating that you wanted to make sure they had this information to consider, as you did not see anyplace to reflect it on their forms. I did that last year on a couple of items, it seemed to help our situation at a couple of schools.</p>
<p>I would just include the supplement however, if the school specifically does not list this as a document they want am I going to “annoy” FA by giving them something they don’t want ?</p>
<p>Well, you want to make sure they know what they are looking at… and if they don’t usually get the supplement, I would wonder about that. If they don’t ask for the supplement, you could send it, but I would also send the letter laying out your concerns in terms a non-accountant would understand as well. I don’t think that would annoy them as long as they find it understandable.</p>
<p>You need to know what each school wants, when they want it and how they want it sent. I wouldn’t send anything without knowing that they want it. If you can’t figure it out from the website, then I would email and ask for clarification.</p>
This link just says any self-employed or business owner parent will need the supplement. Your answers on the profile let them know that you should be sending the supplement too as well as all the other doc a school requires. It could be that some schools have their own business form even though they use the profile. It’s a good idea to contact the schools if you don’t find the info on the website. It doesn’t make sense that there won’t be some kind of followup to the profile that allows you to include the cost of goods.</p>