<p>I worked at job delivering newspapers over the summer (as an Independent Contractor). Everything was done in my name, but I had a friend who did the job with me so we split the check that I got every two weeks.</p>
<p>If I don't take into account that I split the money, I would be getting paid around $2300.</p>
<p>Should I write this number on FAFSA (+ my work study) or do I write the amount the amount that I actually got after splitting? Or does it not really matter?</p>
<p>I think $2300 in student earnings is below the amount that affects EFC, but others can correct me if I’m wrong.</p>
<p>You need to report on FAFSA whatever the amount is that you will have to report on your tax return.</p>
<p>But if your only other income is WS, $2300 is below the protected income allowance. So it should have no effect on your EFC.</p>
<p>If you were paid as an independent contractor - that is, a straight check, with no employee deductions - write the amount that you got after splitting. For $2300, you may have to file a tax return and reported that amount as self-employed income. You would file a 1040-C EZ and subtract out the $1150 you paid to your helper as well as any other out-of-pocket expenses incurred for the job - the remaining amount would be your net income from self-employment.</p>
<p>^And remember, you will owe the full portion of Social Security and Medicare taxes on your net self-employment income!</p>
<p>Hey, thanks for the help everyone!</p>
<p>Correction on the amount I earned (I had a duplicate pay stub) so I really earned about $1800. After the split (helper, and gas money) I personally earned around $800, which looks right after checking my bank account too. Do you think I should still file? (This was my first real job, so I didn’t know if I was going to or not…my supervisor told me when I started she didn’t think I’d earn enough to need to file. Sorry for being such a noob with this!)</p>
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<p>There were some deductions. We had to pay for our supplies, which came out of the check. There may have been other deductions, but I’m not sure what counts as a deduction. Dunno if that affects anything.</p>
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Sorry, I don’t quite understand. What do you mean by this?</p>
<p>When you are paid as an employee, there are payroll deductions for taxes – “FICA”, unemployment insurance (UI), and medicare that come out of every check. </p>
<p>If you didn’t have that stuff coming out of your checks, then you are probably right that you were paid as an independent contractor. If you had self employment income of more than $400, you are required to file. See: [Do</a> You Need to File a Federal Income Tax Return?](<a href=“http://www.irs.gov/individuals/article/0,,id=96623,00.html]Do”>http://www.irs.gov/individuals/article/0,,id=96623,00.html)</p>
<p>If the person who hired you sends you a 1099, then you definitely have to file – a 1099 is a report of your income that is also filed with IRS, and if IRS gets one and you don’t file a return, they’ll come after you later on trying to collect taxes & seeking penalties. Legally, the employer should be filing this – it is required to be filed for any contractor that was paid more than $600 during the year. This should be done by the end of January. </p>
<p>When you file, you will fill out a form 1040 C EZ to determine your net income from self employment (what’s left over after account for your expenses). The “EZ” part is true – you don’t have to itemize the expenses, but can just subtract them out in a lump sum. </p>
<p>You need to pay self-employment taxes of roughly 15% on the net – this is the same as those payroll deductions for FICA, etc., that didn’t get held back from your check. We self-employed people have to pay the same taxes – we just pay them at a different time. </p>
<p>If you have more than $400 net from self employment, then you have to pay the self employment tax. </p>
<p>If your net income from self-employment was $800, then you will owe roughly $113 in self-employment tax. You can use this form to calculate - <a href=“http://www.irs.gov/pub/irs-pdf/f1040sse.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/f1040sse.pdf</a></p>
<p>Here is a schedule C-EZ form – so you can see what you will have to do there:
<a href=“http://www.irs.gov/pub/irs-pdf/f1040sce.pdf[/url]”>http://www.irs.gov/pub/irs-pdf/f1040sce.pdf</a></p>
<p>I remember being deducted for taxes…not sure if they are the same as what you were talking about, though. I’ll be looking for the papers that had all the deductions and credits and such today.</p>
<p>When/how would I go about paying the $113 in taxes? That’s actually a big loss for me, I’m not even sure if I’d have the money to pay that. I have a REALLY tight budget. Hopefully it’s not too soon so I can find a way to earn that.</p>
<p>Also…somewhat off topic but in regards to the FAFSA. We did file yesterday based on estimates from last year (+$2000 more of my Dad’s income that my mom puts as a buffer) & we included the $1800 that I earned before the split. Our EFC this year was about $2500…this year was around $2000 but with two of us in college. Does that mean without my younger sibling in college, my EFC would have been about $4000? That was kind of surprising to me, but it’s still lower than my EFC was this year so I’m not complaining.</p>
<p>Lesson for the future…all employees have 7.65% of their gross wages deducted for the mandatory Social Security and Medicare taxes and the employer also pays a matching amount. Self-employed people, which includes independent contractors, must pay both the employee and employer portion, so 15.3%, of their net profit. Net profit is gross receipts minus business expenses - always keep track of your business expenses as you go along as it’s no fun to have to reconstruct them! Your deductions for the newspapers would certainly qualify, as does your mileage if you drove a car, postage if you had to mail anything to the paper or customers, etc. Additionally, if you hire someone to work for you as an independent contractor and pay them $600 or more, you must generate a 1099 for them and send a copy to the IRS. Although it may make a small dent in your savings to pay the mandatory taxes, it’s the law and at least you do have the money to pay your tax bill, so good job!</p>
<p>On your EFC, yes it would have been around $4K without your sibling…but your sib may have had a different EFC without you! If you included your $800 in savings, abt $200 of that was added to your EFC. I don’t think any of the $1800 impacted your EFC, as students have an income protection allowance of $5250 plus allowances for taxes. Most likely it was your parent’s income that caused the increase as that’s by far the largest contributor to EFC. If you or your parents would like to know more about how the EFC formula works, you can check out the worksheets and tables marked “A” here:
<a href=“http://www.ifap.ed.gov/efcformulaguide/attachments/101310EFCFormulaGuide1112.pdf[/url]”>http://www.ifap.ed.gov/efcformulaguide/attachments/101310EFCFormulaGuide1112.pdf</a></p>
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<p>Well, I don’t have the $800 in savings (or any for that matter anymore, unfortunately…!). It was all spent over this past semester to cover the gap I had in financial aid. Which is why I was worried about paying it in future months, since all the refund money I have from FA and what I should be earning are both already budgeted toward rent, books, and utility bills and other expenses. But what can you do, I’ll be better prepared for whatever job I get in the summer. Thanks for the tips, everyone :)</p>
<p>Since I don’t have any savings…still not fully getting the jump in EFC. We listed my parent income as $44,000 last year, which put us at a $2500 EFC. This year it’s around $46,000…would that really put as at $4000 (minus the 2nd kid in college)? Sorry for all the questions, just trying to understand it all!</p>
<p>When your FAFSA is processed, dig out your report from last year and compare it line by line to this year. No, it doesn’t seem that a $2K increase in parent income would cause a jump in EFC, especially with a 2nd student in college. However, the EFC Formula was adjusted a bit in 2010. That might account for some of the difference if the Parent AAI increased significantly. What state are you in?</p>
<p>The EFC formula is complex. The EFC calculated based on parent income and assets does get split between the 2 of you in college. But the income protection allowance for parent income actually goes down by $2780 when there are 2 in college. So with $2,000 extra income and a reduction of $2780 in the protected income allowance the total parent part of the EFC is being based on an additional $4780 of available income. Which would probably account for the increase you are seeing.</p>
<p>^I think we have a winner…good catch, swimcatsmom! The $2780 + 2000 extra gave them $4780 more in AAI, at 47% of AAI over $29,300 that would add $2246 to the parent’s contribution from AAI.</p>
<p>Hey guys! Thanks so much for the advice. To answer the previous question, I live in VA. </p>
<p>I didn’t know that about the income protection allowance. I was concerned that our EFC would go to being $4000 for my sibling when I graduate from school, which wouldn’t make sense if I only had a $2500 EFC while I was the only one in college. It makes alot more sense now!</p>
<p>We’ll still probably compare our FAFSAs to mine from last year to make sure everything looks right, thanks for that suggestion</p>
<p>Well, there was a slight (1%) decrease in the state tax allowance for Virginia residents…that would have only made a few hundred dollars difference your parent’s in AAI though.</p>
<p>Word to the wise: If you are REQUIRED to file a tax return but do not … and if you are selected for verification … you will not be eligible to receive any federal aid until you file a tax return. If you earn more than $400 in self employment income, FILE THAT RETURN!! It took MONTHS of work with a student to finally get him to understand that he had to file taxes. He finally decided I wasn’t kidding & met with an accountant to do his taxes. We finally got his aid settled just in the nick of time to get loans for fall … had it taken another week, the term would have been over & we would not have been able to originate a loan to cover his fall balance. I hate being the tax meanie, but rules are rules.</p>
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It’s important to find those pay stubs, because it will help sort out whether you were treated on the books as an employee or independent contractor. </p>
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Assuming that was the amount owed, it would be due April 15th – so if you look at it that way you would be fine if you could manage to put away $40/month for the next 3 months If worse came to worse, IRS is really generous about payment plans, but that’s because they are charging you a bunch of interest & penalties along with the plan… so you really don’t want to get into that situation. In the future, if you are ever self-employed again, you will know to plan accordingly. (I’m self-employed and make quarterly deposits with IRS, based on what I anticipate my next years’ liability to be).</p>
<p>Sometime this month, early Feb at the latest, you will receive a 1099 if you were an independent contractor or a W-2 if you were an employee. It will list all the deductions and income for you to file your taxes accordingly.</p>
<p>Found all the stubs! It was an independent contractor position, and looks like I’ll be getting a 1099. I also found out I can deduct mileage and bags when I do file, so that’s a plus!</p>
<p>Good thing this thread came to this, or else I wouldn’t have known until I got stuff in the mail and probably would’ve end up being stressed about it. Thanks so much, everyone!</p>
<p>^That’s great…my guess is that your net profit (and therefore your SE tax) will dwindle once you deduct your mileage. I think the mileage expense rate is .50 this year.</p>