Hi there,
Filling out the FAFSA and CSS Profile this week and am a bit confused when it comes to reporting the amount of our (parents) assets.
I am self-employed and have a sole proprietorship,and have a separate set of bank accounts in the name of the business. We fill out a Schedule C, but because it’s a sole proprietorship, for tax purposes, all income I receive (almost all as contract services for clients) is reported on our 1040, line 12.
My question is: do I need to report the amounts in my business checking and savings accounts on the FAFSA under the “parent assets/bank balances” question, or is it excluded from reporting on the FAFSA because we own 50% of the business and it has less than 100 employees?
I realize that it will all be reported on the CSS profile in one way or another, and again on the CSS Business/Farm Supplement for those colleges that require it, but for the FAFSA, I’m beginning to think that I am not required to include the amounts in those accounts - all of which came directly from payments to the business (we have not put any money into it from our personal accounts).
I have searched through the forums, and while I saw a lengthy thread (regarding a family that owned a plumbing business), the answers were a bit mixed on whether money currently sitting in business accounts was required to be listed on the FAFSA.
Thanks so much in advance for any help you can provide.
As a follow up comment, man…the NPCs on various college websites just don’t handle parents with income from a sole proprietorship well. If I list the income under what “parent 2” earned (line 12, per the instructions), and put in the business account balances under the “business net worth,” the amount offered in aid is fabulous (comparatively speaking). If I put the EXACT SAME INCOME under “business income” (also line 12, which makes no sense), and enter “0” in the “parent 2” income, the amount offered by the college drops by almost 50%!
That makes no sense. I made X amount as a freelancer. That amount doesn’t magically change in value if I put it in a different box. And they can’t be asking me to enter it twice, can they - both in my “parent 2” income, and in the “business income?” The money doesn’t magically double somehow…
You own a business. The net price calculators will not be accurate for you.
Pretty much what I noticed. Just makes it impossible to get a remotely accurate estimate. All I can hope is that the financial aid officers understand there’s not a lot of money happening there, regardless of wherever the heck we put it on the FAFSA or CSS or whathaveyou. We built a college list based on our best estimates of what we could possibly afford, which without any other information, could only be based on the NPCs. Very frustrating.
Also found in another forum that no, any income that is in a business-only account (and yes, they are in the name of the business, which in this case, is just my name as I’m a performer) should not be included in our parent assets because it is considered a business asset/part of the business net worth, which is excluded in our case from the FAFSA (but is NOT excluded on the CSS).
Although as an unincorporated sole proprietorship (pass-through entity), the income I earned (all deposited directly into those business accounts) is reported on the FAFSA, as it appears on line 12 of our 1040 (coming in from the two Schedule Cs I will have to file this year).
I have to say, that as a middle class family, it seems we are squeezed in unfair ways. We don’t have the assets to cover college costs, but instead have very modest savings - which at around 60K, represent pretty much our entire retirement savings. The paltry home equity we have will be counted in the CSS, all our deductions will be added back in, making the AGI virtually useless to ask for. So to even get close to what they are likely to offer in terms of “need based aid,” we will either need to put nothing into retirement (we were able to put a small amount in last two years) or take our entire savings to pay for college.
Yes. I’m whining. Nope, we’re not in a unique situation - just a stupidly surprising one. With our main state schools coming in at $27,000 with NO available aid, it’s not like there are acceptable affordable alternatives here.
Does your child have a financial safety (that they could attend and be happy with that is affordable)? You’re right that the business assets will not be considered for FAFSA but will be for the CSS. It’s also common for CSS schools to add back deductions you’ve taken, which may make what they think your income is higher than how you record it.
No. There are no schools (with the exception of one of our smaller state schools which honestly wouldn’t provide any level of rigor, nor does it have any programs she wishes to major in) that would run less than the main, reputable state school we have, which comes in at $27,000 after all fees. She has been accepted in an Urban Honors College at another state school through the WUE program, but that will still run more than our in-state state school. Those would be her safeties. Out-of-state safeties were pointless to apply to, as they all ran more than we could possibly afford. She opted to apply to 8 additional PLACs, four meets and four reaches/ivies. All have financial aid that should put them in the same ballpark as her two safeties.
But really, until whatever packages that are going to come in come in, I suspect we will have no real idea what we’re looking at.
If she is a competitive applicant for the Ivies, she might have had the SAT or ACT and GPA for a significant merit award elsewhere.
Did she apply to any schools with guaranteed merit aid for her stats?
Wasn’t even aware they existed, with the exception of one PLAC in our city. The merit aid of $20,000 for her stats would leave almost $40k unpaid, which is a significant gap between what we can (not are willing, CAN) pay and what it would cost, so she’d didn’t bother because we couldn’t possibly afford the school. Bit late now. Our local schools don’t provide any aid save for federal loans, for which she barely (if at all) qualifies. At least one of the safeties at least has scholarships department by department, which she’ll be applying to over January (all due by 2/1, before we’ll even be committing to the school, but there ya go).
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Was her SAT CR and Math total over 1450? Does she have a 3.8 GPA? If so, she would have gotten a terrific merit scholarship from University of Alabama. If she is a National Merit Scholarship Finalist, it’s not too late to apply. I believe it’s also not too late to apply to UA Huntsville for their generous merit awards…if she qualifies.
Why doesn’t she qualify for the full GUARANTEED federal loan of $5,500 for freshman?
@BelknapPoint is absolutely correct. All you need to do to get the $5500 Dirext Loan is file your FAFSA. Everyone “qualifies” for that one…even Bill Gates.
Hopefully she will. In working with the EFC calculators, it shows no federal aid available. In doing the NPCs, can’t remember if it showed that or not. But it doesn’t really matter as the $5500 is factored in before that impossible number pops up on the NPC - it’s already taking that amount into account and still asking for at least $10k more than we have.
But my ranting about the NPCs and lack of affordable education for middle class families aside, my original question was whether or not we should list the amounts in my business checking and savings accounts on the FAFSA, and I believe the answer is NO, we should not.
What are her stats and her major?
Maybe we can suggest some schools that STILL have very large merit offers.
How much do you want to pay each year?
CSS schools don’t add back ALL of your business deductions. I have a small business and my experience has been that they add back few, if any, of my actual business expenses from the schedule C. I do not take any deductions for home office, business use of vehicles, meals/entertainment, etc. My deductions are for things I actually buy and use in my business - supplies, rent paid for my office, malpractice insurance, software subscriptions, etc.
Now they do add back any net operating loss - my husband’s business didn’t show a profit for a few years, and we were treated as if his net was zero, rather than negative.
YMMV.