Help - Student Income

Paying for College
1

<p>I work as a referee, so I am not an official employee of any organization and receive payments in cash. Thus, I was under the impression I would be able to report zero income for the previous year. However, I recieved a 1099-MISC form for over 2000 dollars. Do I have to report this as income, as it is not a W2 form? </p>

<p>Also, if I withdraw my entire savings account and spend it would I have to report that?
The reason I am wondering is all of the income I earned the previous year is going towards a summer trip to Europe, thus it will be impossible to spend it on college.</p>

<p>My main questions are, does anything on a 1099-MISC form have to be reported, and if a major withdrawal is made and spent does that have to be reported?</p>

2

<p>Yes you will have to report it as income. If that is all the income you have it will not hurt you as you have @ $3800 in protected income before it affects your EFC.</p>

<p>If you spend the savings account before you file FAFSA you do not have to report it. If you still have it you do have to report it. So if you have expenses to pay for your trip, pay them before you file FAFSA. Students have no asset protection. Your EFC will increase by 20% of assets.</p>

3

<p>However, it will require you to file a 1040 long form because the 1099 income will be report on a schedule c which flows to the 1040. You will be required to pay social security tax as it is considered self-employment, you can write off expenses against the income for travel and uniforms or other things you might be required to have.</p>

4

<p>An article in <em>Money Magazine</em> said, "Keep in mind too that earning more than $4,000 a year could put a student's school and federal grant money in jeopardy."
Kids</a> and Money: Should your kid work in college? - Dec. 11, 2008</p>

<p>Without success, I have been looking at some financial aid sites, trying to find the official regulation or formula that says this. I am assuming that the $4000 will not include income from a work-study job on campus. Is that correct?</p>

<p>In this economic climate, a student probably does not need to worry a lot about earning too much from a summer job, but I would still like to see an official statement of the cap.</p>

5

<p>Yes you are correct. WS is taxable income so is included in the AGI (If a return is required). FAFSA asks for WS income in a seperate question and deducts it from the AGI before calculating the EFC. The protected income (excluding WS and taxable scholarships/grants) cap for dependent students is $3800 (it usually increases a little every year). It actually ends up being a little more because of allowances for FICA and state taxes.</p>

<p>Currently 50% of unprotected student income would go to the EFC.</p>

6

<p>QP:</p>

<p>The federal formula, which is used to determine federal financial aid, has an income protection allowance for students of about 4K. Income under that is "protected" and doesn't increase the Expected Family Contrtibution. Above that, student income increases the EFC by 50% for each dollar earned, thereby decreasing potential aid by the same amount.</p>

<p>You're correct-- income from work study doesn't increase the EFC.</p>

7

<p>^^I know it is a typo, but students have no asset protection. They do have income protection. The percentages, for students, that go to the EFC are 50% for income and 20% for student assets.</p>

8

<p>Oops, you're right, I correct it. Too early-</p>

9

<p>Thanks for the quick response to my questions.</p>

<p>Still searching for the official word on this subject, I ended up at the web site of National Association of Student Financial Aid Administrators. They post a nice summary of recent changes to the College Cost Reduction and Access Act.
New</a> Law Makes Federal Methodology Changes</p>

<p>They report that, "Beginning with the 2009-10 award year, the new law provides for scheduled increases in the income protection allowance (IPA) for dependent students, independent students without dependents other than a spouse, and independent students with dependents other than a spouse. The law specifies IPA amounts through the 2012-2013 award year. For each academic year after 2012-2013, student IPAs will increase relative to the Consumer Price Index (CPI)."</p>

<p>Unfortunately, the NASFAA detailed summary of the changes is available only to members, so I found the legislation. Here's the table, showing the increases in the student income protection allowance for dependent students through 2013.</p>

<p>TITLE VI--NEED ANALYSIS</p>

<p>SEC. 601. SUPPORT FOR WORKING STUDENTS.</p>

<p>(a) Dependent Students- Subparagraph (D) of section 475(g)(2) (20 U.S.C. 1087oo(g)(2)(D)) is amended to read as follows:</p>

<p>(D) an income protection allowance of the following amount (or a successor amount prescribed by the Secretary under section 478)--</p>

<p>(i) for academic year 2009-2010, $3,750;</p>

<p>(ii) for academic year 2010-2011, $4,500;</p>

<p>(iii) for academic year 2011-2012, $5,250; and</p>

<p>(iv) for academic year 2012-2013, $6,000;'</p>

<p><a href="http://www.govtrack.us/congress/billtext.xpd?bill=h110-2669&version=enr&nid=t0%3Aenr%3A297%5B/url%5D"&gt;http://www.govtrack.us/congress/billtext.xpd?bill=h110-2669&version=enr&nid=t0%3Aenr%3A297&lt;/a&gt;&lt;/p>

<p>In case the link does not work, I found it by searching "College Cost Reduction and Access Act." The bill is H.R. 2669 of the 110th Congress.</p>

<p>The link above takes you to the full text of the bill. There is also a nice summary at the same web site of the key changes to the federal financial aid policies.</p>

10

<p>Swimcatsmom and Findmepete: Thanks for the information! It's great that people on this forum are eager and willing to help other with this difficult process.</p>

<p>Also, I know I will find out my EFC after I do the Profile/FAFSA, but I want an estimate of what I can expect. With parental income just above 150k, but few assets (220k home and no college savings), how much aid will I qualify for?</p>

11

<p>Your FAFSA EFC will be high. Probably in the 35,000- 40,000 range. The only federal aid you will qualify for will be loans (and possibly work study if your school's COA is more than your EFC).</p>

<p>Profile looks at more information than FAFSA and how the information is used depends on each profile school. Some use home equity, some do not, some use it but cap it at a % of salary etc. Your need as calculated by the school using CSS may be higher or lower than that calculated using FAFSA (schools using FAFSA and CSS usually use FAFSA to determine federal aid and CSS to determine institutional aid). So it is difficult to anticipate what they will determine your need to be. Just using the FAFSA EFC your need would probably not be very high. Say you EFC is 38,000 and your school COA is $50,000 then the 'need' would be $12,000. (It will likely be different because of CSS). In what form that need would be met would depend on the school and it's aid policies. SOme promise to meet full need without loans, others promise to meet full need but may include loans.</p>

<p>Many schools that use CSS do expect an annual student contribution regardless of the income reported on FAFSA. This will vary by school.</p>

12

<p>Quillpen - if you like knowing exactly how the EFC is calculated (I do :D- don't like putting in numbers and not knowing how the output is arrived at) the best place to look is the EFC formula
<a href="http://www.ifap.ed.gov/efcformulaguide/attachments/111408EFCFormulaGuide0910.pdf%5B/url%5D"&gt;http://www.ifap.ed.gov/efcformulaguide/attachments/111408EFCFormulaGuide0910.pdf&lt;/a&gt;&lt;/p>

<p>It shows you everything - income protection limits, asset protection, the strange percentages they use to make allowances for State taxes (which are not the actual State tax rates - not in my state anyway). Makes an interesting read.</p>