<p>so if a family had money saved up in their bank account, would they be able to move all that money into their business?</p>
<p>bump! I am wondering the same thing as matta. Also, if you complete a schedule C, how difficult is it to incorporate?</p>
<p>about the small business. If this is true for the Fafsa what about the application thru College Board. That has a special suppliment for small business. Can you also skip filling that out. I'm working on my son's cornell financial aide form right now and it asks if you own a small business to send copies of last years tax return and to fill out the business farm suppliment based on last years numbers due today jan 1. , my son only handed it to me today. But with tomorrow being no mail in honor of presd Ford and my postage meter at work I should be okay. Any Suggestions. Fill out small business form or not?</p>
<p>mochasmom, from what I understand, Cornell requires the B/F supplement. I would send it.</p>
<p>Anyone know about if your small business owns real estate? In the past, it had to be counted. Sounds like now it doesn't?</p>
<p>As this was enacted in July, is it retroactive to 2006/2007? Can I still go back and correct my 2006/2007 FAFSA and have it recalc our EFC for my D's aid package? We had to submit the Business Farm supplement to Emerson and were close enough to get a subsidized Stafford, but no grant aid.</p>
<p>"so if a family had money saved up in their bank account, would they be able to move all that money into their business?"
As a small business owner, I would highly recommend that people check with their tax person/cpa. Our business is an S corp and we file a schedule C. If you are incorporated and you move money into the business you cannot arbitrarily take it out. You can't just "move money" into the business without declaring it as income and paying taxes. Generally speaking, I treat our business and it's accounts as if they were just a company I worked for. You can't think of it as "your" money. Of course, in some cases you can take money (retained earnings) from the company as shareholder's distributions but you still pay income tax on them and you can't put money from your personal account into the business just to save on finances and then move it back later.</p>
<p>Is the business/farm supplement supposed to be estimated as well, until taxes are done later in the month?</p>
<p>I believe this change only applies to the FAFSA, not to the Profile. I've read somewhere (don't recall where now) that you can amend your 06/07 FAFSA if this change will effect your EFC. Not sure how individual colleges will handle the changed EFC at this point, since aid has been awarded and partially disbursed.</p>
<p>I don't believe you could just "move" money into your business to shelter it. Remember, the change is a change in calculating ASSETS, not income. Business assets used to count in the calculation of the EFC, as the equity of the business (assets less liability) was discounted and then added to personal assets to see whether it exceeded the Asset Protection Allowance (around 45K for most families, depending on age of older parent and number in the family). Now, for family businesses, the equity of the business isn't included at all in the calculation.</p>
<p>For most, it won't make any difference, because most families don't exceed the Asset Protection Allowance. But for some small business owners with significant equity in the business, it could make a significant difference in the asset contribution to the EFC.</p>
<p>The potential loophole discussed above (leaving aside for a moment the fact that the whole change is a loophole) was the possibility that small businesses who are incorporated, and whose owner regularly draws a salary, could reduce his/her salary and leave cash reserves in the business, thereby effectively reducing INCOME (and increasing the unreported business ASSETS in the corporate entity). Not a lawyer, or an accountant, so I have no clue if this would work. Seems, um, dodgy to me. </p>
<p>Sunshadow-- yeah, you can estimate all of the forms if you need to, in order to meet deadlines, then correct after taxes are done.</p>
<p>Does this also mean on the line that asks about current balance of cash, savings, and checking accounts that you only include amounts in personal accounts - nothing from the business accounts?</p>
<p>I understand the part not declaring the family owned business but I want to be sure I'm clear about everything.</p>
<p>Thanks</p>
<p>If it's owned by the business, don't report it. (I double-checked this with several FA officers.)</p>
<p>just a warning to those who are thinking of moving personal $ into business account--</p>
<p>once you cross that line, the business can be sued for both its worth AND your personal worth...anytime you mix them, you open that door. this is from our CPA. your house, cars, etc would all be up for grabs...not a pleasant thought.</p>
<p>zel17, thanks. That is the point I was trying to make earlier...you can just mix and match from business to personal and back again. And the law is about business equity (property and retained earnings, etc.) not about current business assets. Current assets don't belong to you personally, they belong to the company.</p>
<p>another advantage if your small business is incorporated is that your employer (your business) contributions to tax-deferred pension plans (as opposed to contributions you make) do not get reported on the FAFSA as untaxed benefit (Schedule B). Our corp has an SEP plan and can continue to contribute to our retirmenet accounts during these FAFSA years without creating more income (and therefore more EFC).</p>
<p>If you are setting up a company a single member LLC can be disregarded by the IRS. You simply file as a sole proprietor. A subchapter s corporation requires filing tax returns.</p>
<p>COmom</p>
<p>Are you sure about that? On my estimated FASFA I added the contributions my S corp made to my solo IRA on worksheet B thus adding it back for financial aid purposes. . The reason I had opened the account was to save on self employment tax, but it would be really great if I didn't have to add it back in on my FASFA (and a reason to contribute more next year)</p>
<p>On worksheet B, wouldn't it go under "other untaxed benefits" It seems like that would cover just about anything not covered in other parts of the worksheet.</p>
<p>Does anyone else have an answer or opinion on this???</p>
<p>After typing the above, I decided to check if there was any place on my CSS profile where I'd put my S corp contributions to my solo IRA, and there wasn't. Since the CSS usually asks for more details, I'm guessing COmom is definately right - and I can't wait to submit my corrected FAFSA once my taxes are done. </p>
<p>Once again - any comments would be great.</p>
<p>here's the URL to where I found that:</p>
<p>Completing</a> the FAFSA 07-08/The Application Questions(41)</p>
<p>"Question 41 - Worksheet B </p>
<p>Payments to tax-deferred pension and savings plans. You must report money paid into tax-sheltered or deferred annuities (whether paid directly or withheld from earnings), including—but not limited to—amounts reported on the W-2 Form, in Boxes 12a through 12d, codes D, E, F, G, H, and S. You must include untaxed portions of 401(k) and 403(b) plans. Note that employer contributions to tax-deferred pension and savings plans should not be reported on the FAFSA as an untaxed benefit."</p>
<p>Thank you so much for the information.</p>
<p>You are welcome. It seemed too good to be true when I found it. I must have re-checked it a dozen times to be sure I was reading it correctly! I don't know the rules about an S-corp contributing to your individual IRA - though... you might want to double check on that. Ours is an SEP that the company set up. It's easy to set up if you find that it would be better to do it that way next year (this year for next years FAFSA).</p>