<p>No one in my family ever done this before so I'm really confused. My EFC was 667 before and we had to do verification. They asked for W-2 forms from my parents, but they are self employed so they don't have those forms. However, my parents contacted their accountant and he gave us a 1099 to send to the school. I then sent the 1099 form in and the school told me that they didn't need it. They asked me to send a signed note in saying that my parents didn't have W-2s forms. So I did, and received a email saying that my fafsa was being corrected with this reason: "we updated your parents wage amounts since their earnings are reported on a 1099 form and this does not need to be reported in this field."</p>
<p>So I waited for two days and then received the corrected fafsa with an efc of 2371...! My parents income were changed to $0's even though they did worked. Why did this happen? Can I do something about this? :\ Thank you.</p>
<p>You need to contact the school and ask for a copy of the revised FAFSA, and see what changes were made for your EFC to be increased. The school might have gotten a copy of your family tax returns and used them to come up with the numbers. </p>
<p>When self employment is in the picture, it gets hazy as to how everything is calculated. Those self employed often take deductions against income or have assets that are secured and get rents or income that have loans against them. How a school assesses this is often variable. However, it is very important that you understand what the school has done in coming up with this EFC and that you can duplicate the numbers on your own. If you don’t understand the calculation, you should learn as soon as possible. Find out exactly what was used how. So get a hard copy of the report and compare line by line with what your tax return is reporting and make sure you understand what is going on here, and question the fin aid director with anything that you do not understand.</p>
<p>Income from work was correctly changed to 0. Only W2 income is counted as income from work (amounts that would be entered on the first line of a tax return). A change like this does increase the EFC, but it is correct. I know this for a fact … I had to make this correction many times.</p>
<p>It has to do with taxes … like social security, etc. I can’t remember exactly why, but I know it makes a difference. I have actually done hand-calculations to make sure the EFC was correct, because it made such a difference! If you look through the EFC formula guide, you’ll be able to figure it out. I’m too lazy! :)</p>
<p>Would it not be because certain business deductions are disallowed in calculating business income for FAFSA purposes?</p>
<p>It doesn’t make sense that the increase would be attributable to taxes, since the self-employment tax actually reduces the take-home pay of someone who’s self-employed . . . meaning it’s worth less, dollar for dollar, than the equivalent earned income.</p>
<p>Questions 38 and 39 ask about earnings (wages, salaries, tips, etc.) in 2012. Answer the questions whether or not a tax return was filed. This
information may be on the W-2 forms, or on IRS Form 1040lines 7 + 12 + 18 + Box 14 (Code A) of IRS Schedule K-1 (Form 1065); on 1040Aline 7; or
on 1040EZline 1. If any individual earning item is negative, do not include that item in your calculation.</p>
<hr>
<p>The above is from the FAFSA question asking about income from work. I take back what I said above … the increase I was thinking of has to do with changing income from work from being split between mom & dad to being attributed to just mom or dad (due to the per-person allowance for working - only one person would get it, rather than two so EFC would rise). </p>
<p>But if the income from work was not reported on a W2 and was not reported on schedule C … but was just 1099 income reported on the 1040 as other income … then it wouldn’t be considered “income from work.” In this case, it would not get the tax allowances or the allowance for working.</p>
<p>That could be it … but I don’t know enough about how things were reported on the 1040 and/or on the FAFSA in the first place to know.</p>
<p>Thanks for all the responses and sorry for the late reply! @Kelsmom: Oh, I looked through my parent’s tax return and my parent’s income from work was reported on schedule C…was that the W2 the school was asking for?</p>
<p>Schedule C income is considered “income from work” because you pay self employment tax on it. Just because income is on a 1099 does not mean it might still be considered income from work. </p>
<p>Without knowing all the specifics I cannot say for sure but your FAA might have made a mistake.</p>
<p>The 1099 was given as a request, after we were finished with taxes, because my dad asked for a W-2 form. The accountant was a bit confused if I remember, lol. The Schedule C was already in their tax return before the request; however, I’ll call the financial aid office today and talk about this. Thank your for the info and hopefully everything will get cleared up. (:</p>
<p>Maybe the ‘income from work’ was double counted - once on Schedule C as self employment income and then a second time from the 1099 that the confused accountant (incorrectly?) prepared after the fact.</p>
<p>That is a possibility. If the 1099 income was used in calculating the Schedule C number that is put on line 12 of the 1040, that income is most likely less than the income on the 1099 (due to deductions). Only the amount on line 12 can be considered income from work. There would have been no W2 to provide if the only income is business income. What you should have been asked to provide was your Schedule C - the reason for this is to see if one or both parents are listed (because there is an allowance for two working parents that is higher than the allowance for one working parent, the school will check to see if it’s mom, dad, or mom & dad earning the business income).</p>
<p>What is the amount on your parents’ 1040 on line 12? Is there any amount on line 7? Look at your FAFSA online - you will be able to see the school’s changes. Is the total of the income from work that is listed on the FAFSA (questions 86 and 87) the same as the total of line 7 plus line 12 on the 1040? It should be. Is there a number for both question 86 and question 87? If not, do both parents work, or does just one work?</p>
<p>Line 12 is 50,246 and there’s no amount on line 7. The school changed questions 86 and 87 to 0s (it added up to 50,246 before). Both my parents work there.
But I talked to the Financial Aid office and they said that since my parents were self-employed, there are no W-2s so that’s why their income are 0s. They also told me they only requested W-2…So maybe you were right before? I’m so confused.</p>
<p>Please refer your aid office to the 2013-2014 Verification Guide, Chapter 2, AVG-12, sidebar. This reads: Income earned from work and the IRS 1040 form
The FAFSA instructs the applicant to sum lines 7, 12, and 18 of the 1040 form and box 14 [code A] of Schedule K-1 (Form 1065) as an option for determining the income earned from work. But when the values of lines 12 or 18 or box 14 are negative, this will reduce the total and can wrongly affect the Social Security allowance. If values from lines 12 or 18 or box 14 are negative, treat them as zero when determining the income earned from work.</p>
Thank you so much Kelsmom and others who tried to help!</p>