<p>Does anyone know if someone who makes lets say 500,000 but loses 400,000 from business will be treated in terms of financial aid similar to indiviual B who makes 100,000 with no losses. Hopefully this makes sense to someone. I'm curious if colleges are looking for TOTAL INCOME (loss) or ordinary business income (loss) which includes deductions from taxes, licenses, rent etc...</p>
<p>In short, if person A takes in more income than person B yet person A profits the same as person B because of deductions, losses etc, would their financial aid be similar?</p>
<p>I’m just confused as to why some income would be added back? I understand depreciation but all my other deductions (supplies, insurance (not health), automobile expense, telephone etc…) are legit expenses that are only incurred by the business. I pay for my own “supplies” and I also pay for expenses to my automobile unrelated to business. How can they add back in expenses that a business has to have for survival? do they not care that it is inevitable that a busines will have expenses?</p>
<p>“They” can do anything they want. Them’s the rules. Some of the rules make absolutely no sense and are terribly unfair in that they benefit some people and penalize. So forget the reasonableness about any of this. Focus on learning the rules as much as you can, which in itself is nearly impossible because each school can do as it pleases with its own money and is highly unlikely to divulge how they handle a lot of these things until you are accepted, have your package and go over the danged thing line item by line item and get an explanation. At which point you will be under the gun to pick a school. </p>
<p>You have to understand that the purpose is to give you as little money as possible without hurting the overall picture, so the entire PROFILE system is set up to go after every penny. If you thought the FAFSA EFC stood for “Every Friggin’ Cent”, you haven’t gone through the PROFILE vetting yet. Be aware, however, that these are schools that have money they have dedicated towards financial need. Most FAFSA only schools don’t care what your need is, they just gap most students. They don’t come close to even beginning to meet aid beyond what government money you have. The PROFILE schools have some money and are trying to stretch it as much as they can to give the most students that they accept to be able to attend.</p>
<p>Well, if I recall, the FAFSA just wants to know your business income as reported on whatever schedule you use to calculate it for tax purposes. That would be your total business profits reported. CSS Profile requires much more detail, as has been discussed. Yes, “they” can count whatever they choose - it’s their money and they can divvy it out however they’d like. As best I understand it, different profile schools “add back” different deductions so it’s hard to know where you’ll wind up until they give you the aid offer.</p>
<p>Also, CSS Profile wants to know the VALUE of your business - and/or assign a value to it, at their discretion. Who knows how this winds up being calculated or how you’d use a portion of your business’s value to pay a college bill. As was said, stop worrying about “fair” and worry about what, if anything, you can do to improve your situation. Also, you do need to know that the NPC for a Profile school may be far off if you’re self-employed.</p>
<p>The FAFSA does just look at what is reported for tax purposes-- but you will not get any grant money with $100K in income. All you will get is the federal loan amounts. (The only exception I can imagine is if you have a very large family with several kids in college at the same time.) </p>
<p>The Profile just gathers information that the colleges can use however they want. I would expect that they would add back income.</p>
<p>*I’m just confused as to why some [deductions] would be added back? I understand depreciation but all my other deductions (supplies, insurance (not health), automobile expense, telephone etc…) are legit expenses that are only incurred by the business. I pay for my own “supplies” and I also pay for expenses to my automobile unrelated to business. How can they add back in expenses that a business has to have for survival? do they not care that it is inevitable that a busines will have expenses?
*</p>
<p>Obviously, none of us know what your deductions are, nor do we know if they’re EXCLUSIVELY for the business. If you use your cell phone, car, etc for personal use as well, then CSS schools will likely add some of those expenses/deductions back in because “regular folks” aren’t getting to deduct that portion of their personal expenses. </p>
<p>So, for instance, if your car is leased for $10k per year, and its insurance is $1k per year, and you’re submitting all your gasoline and repair receipts, but you’re using the car on nights and weekends for personal use, then perhaps the school will add back in 40% of those deductions. I’m not speaking with authority here…just providing some “maybe this is what happens” examples.</p>
<p>If your business losses are for something like a building burning down, that would make sense. I’m not a business owner but I’m having trouble understanding how a small business could gross $400,000 a year and have $300,000 in losses.</p>
<p>^^^
I’m wondering if it’s a new business…maybe a newly purchased franchise? Or a business that deals with pricey items with little mark-up?</p>
<p>Anyway…I recall another self-employed person complaining that his child’s CSS school added back in the “employer portion” of his FICA (obviously, he pays both portions). Don’t know if that’s true or not.</p>
<p>Thanks for all the replies! The business is actually a construction business in Las Vegas and the reason it has so much losses the past few years is because of the economic situation and its impact. My deductions are very high as well…the business is insured (~50k) requires supplies for plans (30k) uses telephone (7k) and miscellaneous purchases for the business are around (10k). The business has an extremely high amount of sales but with VERY LITTLE return. If colleges add back in the ~100k deductions I have, S has no chance at finanial aid which is unfortunate as our adjusted gross income this year was right around 50k AND we have another child in college. I guess it’s just unfortunate that my self employed status will probably interfere with S chance of his dream school! Maybe I can simply pray that they “add back” while remembering the fact that businesses have inherited expenses! Oh well my rant is over Sorry to drag this on</p>
<p>P.S. my automobiles for business are used EXCLUSIVELY for business as indicated on the tax return (100% business use)</p>
<p>Damond…the best advice I can give is DO NOT let your kiddo believe there is a “dream school”. The reality is there are MANY schools where he can fulfill his dreams. Having a dream school sometimes leads to great disappointment. Better to have a list of great schools from which to choose!</p>
<p>Yes, I was going to point out that only the portion actually used for business is deducted on the tax return. Damond, it sounds to me like your son needs to consider several Fafsa-only schools or places with guaranteed merit. Even if full need is not met, the costs may get low enough that the college is accessible with student work and a minimum loan.</p>
<p>Yup, those financial aid officer are worse than the “revenoors’”. What the feds let you take out, the make you put back in. You gotta watch the fillings of you teeth when you fill out PROFILE.</p>
<p>Personally I like the schools that use CSS/Profile, because they tend to be more flexible and look at the total picture. Not sure if you mean the business has “losses” or whether these are costs of business (materials, labor, taxes, etc.) As pointed out, depreciation and deductions for items that may be used personally (car) probably will get added back in. I would definitely fill out the Additional Information section of the CSS/Profile to explain your personal situation.</p>
<p>Do you guys think “utilities” are added back?
Also one of the trucks appears on my taxes as “Flatbed.” I hope they’d understand that a Flatbed is an EXCLUSIVE business related automobile</p>
According to OP’s example, he has $400,000 in income and $300,000 in expenses for a $100,000 net income. i.e. the $300,000 isn’t “loss” over and above the $400,000 but the expenses of the business, which still provides him an income.</p>
<p>Re: Utilities…I would think of the OP runs the business out of their home, the utilities WOULD be added back in. Simply put, he/she would have those same home utility costs if the business were not located in the home.</p>
Sorry to drag this on</p>